US oil, gas M&As flat amid low crude: PwC
OREANDA-NEWS. Mergers and acquisitions (M&A) in the US oil and gas industry held flat in the first quarter from a year earlier amid low, yet volatile, crude prices.
"Low lingering oil prices shut down access to the capital markets and pressured valuations, slowing the potential for a robust M&A market," accounting and consulting firm PwC said in its quarterly study.
There were 39 oil and gas deals during the first three months of the year, unchanged from a year ago. In terms of total value, they fell by 19pc to $28bn from $34.4bn. Overall, there were three megadeals worth $18.6bn, representing 66pc of total value. In comparison, there were 42 deals worth $31.6bn in the fourth quarter, which was sharply lower than the 70 completed a year earlier, worth $103.4bn.
Some of the major deals during the quarter were US independent Anadarko selling $1.3bn of assets, which included the sale of the Springfield Pipeline midstream gathering system in south Texas to Western Gas Partners for $750mn, and its interest in East Chalk area of Texas to Zarvona Energy for $105mn. WPX Energy sold its natural gas assets in Colorado's Piceance basin for $910mn, while Chesapeake had closed or had agreements in place for about $700mn in asset sales as of the end of February.
Crude prices touched their lowest in the current downturn, below $30/bl, and rose back to $40/bl during the first quarter, making it difficult for buyers and sellers to attach a value to oil and gas assets. A slowdown in M&A further exacerbated US independents' finances, many of which were banking on asset sales to repay debt and shore up their balance sheets.
"As cash flow for oil and gas companies remains constrained, stress around leveraged assets and over extended balance sheets remain the top concerns," head for oil and gas sector deals Doug Meier said. But "valuation gaps between prospective buyers and seller continue to hinder deal announcements."
Financial investors accounted for "a modest" 10 deals, down by 50pc in value from a year earlier and 48pc below the previous quarter. Equity deals from private investors accounted for nine of those 10 deals, worth $1.9bn, with five deals in the upstream worth $1.1bn.
There were 24 corporate deals worth $25bn and 15 asset deals worth $3.1bn in the first quarter. Corporate transactions accounted for 62pc of the total volume of deals and 89pc of the value.
Of the total, there were 19 deals in the US upstream industry worth $9.1bn, a 58pc increase in terms of volume and up 151pc in terms of value. Of that, there were 13 shale asset transactions worth $3.5bn. Most deals were in the Permian and Eagle Ford basins in Texas.
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