Q3 upstream oil and gas M&A spending was 34% below the five-year quarterly average and 42% down on Q2 with $21 billion in new deals announced.
Full deal details are available within Evaluate Energy’s M&A database. Click here for details.
Key Q3 observations
- Eight of the top 10 deals by value were oil-focused.
- Payback multiples remain low: median EBITDA multiples were 2.9x compared to 7x over the past decade.This indicates the market has little faith in the current high earnings environment continuing in the medium- to long-term.
- 78% of deal activity by value focused on U.S. and Canadian assets.
- ExxonMobil agreed a $4.9 billion deal to acquire Denbury in the largest deal (more below).
- Permian Resources Corp. will acquire Earthstone Energy for $4.5 billion to create a $14 billion premier Delaware Basin operator.
- For more on the Permian Basin, click here for why Diamondback Energy’s CEO thinks M&A targets are getting tougher to find
- Strathcona Resources acquired Pipestone Energy in Canada’s largest deal, valued at around C$1 billion.
- Approximately 400,000 boe/d changed hands; the lowest quarterly volume since Q2 2020.
While deal activity was down, prices were up
- WTI ($80.83) rose 10% on Q2 2023 levels
- Henry Hub gas prices ($2.50) rose 19% since Q2, although this represents the second lowest quarterly average since 2020
ExxonMobil secures carbon capture assets with Denbury
In many ways, Denbury’s oil and gas production in the Gulf Coast and Rocky Mountains regions represents a perfect bolt-on acquisition to ExxonMobil’s U.S. upstream portfolio.
While this remains Denbury’s predominant business, its extensive carbon capture infrastructure and future storage potential – currently reported at around 2 billion metric tonnes – is very attractive.
The $4.9 billion deal equates to an EBITDA multiple of nearly 8x – a sum far more in line with corporate mergers of years gone by that shows just how much value ExxonMobil attributes to this carbon capture asset base.
The deal will instantly improve ExxonMobil’s ESG rating and open up an extra revenue stream; the new U.S. Climate bill provides tax credits of $85 per tonne of carbon stored permanently or $60 per tonne of carbon used in enhanced oil recovery.
ExxonMobil followed the Denbury deal with two more carbon capture agreements:
- Extending a carbon capture technology collaboration with FuelCell Energy Inc. (July).
- Securing four licenses in the U.K.’s first carbon capture licensing round (September).
Top 10 deals by value – Other supermajors in low carbon or renewable sectors
Evaluate Energy’s M&A database holds every upstream deal worldwide since 2008, allowing daily comparisons of key metrics, corporate valuations and changes in spending behavior over time. For more on our data, which also includes data on downstream, midstream, service sector and renewable energy M&A activity, click the button below.
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