US oil, gas mergers hit 10-year high in 2014: PwC

OREANDA-NEWS. US oil and gas industry mergers hit a 10-year high in 2014, driven by nearly 50 mega deals valued at over \$1bn each.

There were 49 mega deals worth \$266.1bn in 2014 compared with 24 worth \$71bn in 2013, according to the PwC study. There were 252 deals total worth \$321.5bn versus 187 deals worth \$117.2bn in 2013. In the last quarter of 2014, there were a total of 57 deals worth \$128.7bn versus 56 deals worth \$43bn in the same months a year ago. Mega deals represented 91pc of total deal value in the fourth quarter. PwC only takes into account deals worth more than \$50mn for the report.

Of total upstream deals in the fourth quarter, shale accounted for 19 transactions worth \$14.9bn, or 76pc of the total. The most active shale regions for mergers and acquisitions in the fourth quarter were the Bakken and Permian, which had four deals each worth \$3.1bn and \$2.4bnn, respectively. The Marcellus shale area had three deals worth \$5.7bn, the Eagle Ford in Texas also had three deals, but were worth \$484mn, while the Niobrara and Haynesville each had one deal.

Overall deals were higher even though there was a slowdown in activity in November and December following an accelerated drop in oil prices, which led to a "marked shift in deal sentiment from playing offense to playing defense as companies focused on maintaining liquidity," said Doug Meier, PwC's US energy sector deals leader. The current low price environment could boost deal flow, particularly as leveraged companies seek to strengthen balance sheets.

A near 60pc plunge in crude prices since June has squeezed cash flows for oil and gas producers, prompting many to shed assets and focus only on areas that offer the best returns. That is giving companies with deeper pockets an opportunity to snap up properties and acreage. US producers are feeling the heat much more because the sector as a whole has historically outspent income to fund growth.

Foreign investor deals also reached at a 10-year high, touching \$71.2bn with 56 transactions. In the fourth quarter, foreign buyers announced 15 deals, accounting for \$25.4bn in value, posting an increase of 25pc in volume and a five-fold jump in volume.

There were 19 midstream deals worth \$53bn in the fourth quarter, more than doubling in volume and increasing nearly four-fold in value. The total number of downstream deals decreased to six in the fourth quarter, but the total deal value increased to \$7bn compared to nine deals worth \$4.2bn a year earlier.