$21 Billion in Oil & Gas Deals Announced First Quarter 2013

$21 Billion in Oil & Gas Deals Announced First Quarter 2013 
Market Slows From Record $141 Billion in Q4 2012 
HOUSTON, TX -- (Marketwired) -- 04/12/13 --  PLS Inc. 


 
--  Market takes a breather after Q4 2012 buying binge, lowest quarterly
    deal value since at least Q1 2007
--  Deal inventory growing, over $116 billion of deals in play -- up from
    $85 billion at start of 2013
--  Linn Energy's $4.3 billion buy of Berry Petroleum largest in quarter
    and opens door to further upstream C-Corp purchase by MLPs
--  Chinese NOC's buying continues, takes 41% share of market

  
PLS Inc. ("PLS"), a Houston-based research, transaction and advisory
firm, in conjunction with its international partner, Derrick
Petroleum Services ("Derrick"), announced that global M&A activity
for Q1 2013 slowed to $20.6 billion in 106 separate transactions with
deal values disclosed. This compares to a record $140.9 billion in
208 deals in Q4 2012 and $41.9 billion in 197 deals in Q1 2012. The
Q1 2013 quarterly deal value is the lowest since at least Q1 2007
($21.8 billion) while the Q1 2013 deal count is the lowest since the
record of 64 deals in Q1 2009 (the quarter following the U.S. market
crisis). 


 
                                                                            
                                   Table 1                                  
              Quarterly Global E&P Mergers & Acquisitions                   
                                                                            
                            Q1-2012   Q2-2012   Q3-2012   Q4-2012   Q1-2013 
# of Deals                    197       168       144       208       106   
Deal Value (US$MM)          $41,902   $28,222   $50,747   $140,895  $20,950 

 
Source: PLS Derrick M&A Database. Only includes deals with price
disclosure. 
According to Brian Lidsky, PLS Managing Director, "After a record
level of activity late in 2012 due to U.S. fiscal cliff concerns, the
oil and gas deal markets slowed dramatically in early 2013 as buyers
digested their acquisitions. Deal activity slipped about 40% from the
prior four-quarter average and deal inventory has grown by about a
third. In North America, buyers are g
etting an upper hand for early
stage and higher risk projects. Counter balancing this, however, are
rising natural gas prices in North America. Also, highly-prized
resource play positions, particularly ones that are operated,
de-risked and going into full development will continue to command
premiums." 
Quarterly highlights include the first acquisition of a C-Corp by an
upstream MLP or LLC. Linn Energy's $4.3 billion offer for Berry
Petroleum. Traditionally, these buyers have been restricted to
purchasing long-lived, low-risk cash flowing assets and are able to
pay top dollar; through prudent hedging, cost controls and ability to
tap the capital markets as necessary. Continuing the trend of Chinese
NOC's buying oil and gas assets globally, three of the top five deals
this quarter were bought by Chinese buyers -- two in the United
States and one in Mozambique.  
Global - Q1 2013  
North America's $13.7 billion in oil and gas transactions (see Table
2) led the world accounting for 65% of transactions by dollar volume.
This is up from a 61% share in Q4 2012, excluding the $61 billion
Rosneft buy of TNK-BP.  


 
                                                                  
                              Table 2                             
              Global Oil and Gas M&A Deals - Q1 2013              
                                                                  
Continent                             Deal Value    # of Deals    
                                      (US$MM)                     
                                                                  
Africa                                $4,247.0      2             
Asia                                  $59.6         2             
Australia                             $208.0        2             
Europe                                $868.9        5             
Former Soviet Union                   $1,388.6      5             
Middle East                           $62.0         1             
North America                         $13,658.5     84            
South America                         $457.9        5             
                                                                  
                            TOTAL     $20,950.5     106           

 
Source: PLS Derrick M&A Database. Number of deals above is for deals
with price disclosure. For Q1, deal count totaled 176 including deals
without price disclosure. 
The United States accounted for 63% of deal value and 51% of deal
count. Canada saw numerous small deals and accounted for 28% of the
deals though its share of deal value slipped dramatically to under 3%
(compared to a trailing four-quarter global market share of 20%). In
Canada, the quarter's highlight was the final approval by both Canada
and the United States of CNOOC's $17.9 billion purchase of Nexen
which closed on February 25, 2013 -- a deal first announced in Q3
2012. 
According to Mangesh Hirve, Director, Derrick Petroleum Services,
"While Canada and the United States finally approved CNOOC's
acquisition of Nexen, they did so with some hesitancy. In Canada, the
government signaled this to be the last deal of its kind that would
grant a NOC rights to take a majority stake in Alberta's strategic
oil sands. That being said, Chinese NOC's buying spree continued,
taking a record 41% share of the overall market this quarter with
$8.6 billion of buys. Since 2008, this latest buying brings Chinese
NOCs total over the $100 billion mark to $104.7 billion." 
Regionally, in terms of deal value this quarter, North America ($13.7
billion) was followed by Africa ($4.2 billion), the FSU ($1.4
billion) and Europe ($0.9 billion). All other regions tallied totals
of less than $500 million. 
Five deals topped $1 billion (Table 3) globally during the quarter --
four in the United States and one in Mozambique. This compares to a
record 22 deals mega deals in Q4 2012.  


 
                                                                            
                                   Table 3                                  
                      Q1 2013 Global Deals > $1 Billion                     
                                                                            
Date         Buyers            Sellers              Deal Value Country      
                                                    (US$MM)                 
02/21/2013   Linn Energy       Berry Petroleum      $4,339     United States
03/14/2013   CNPC (China)      ENI                  $4,210     Mozambique   
01/30/2013   Sinochem          Pioneer Natural Res. $1,700     United States
01/15/2013   Denbury Resources ExxonMobil           $1,050     United States
02/25/2013   Sinopec           Chesapeake           $1,020     United States

 
Source: PLS Derrick M&A Database  
For perspective, the average annual pace of deals greater than $1
billion from 2007-2012 is 37. 
United States - Q1 2013  
United States deal activity in Q1 2013 fell 42% to 54 transactions
compared to 94 in Q4 2013 and is also down 33% from the 2012
quarterly average (Table 4). Deal value also slipped in 63% to 
$13.1
billion compared to Q4 2012 and is down 36% from the 2012 quarterly
average. 


 
                                                                            
                                   Table 4                                  
             Quarterly United States E&P Mergers & Acquisitions             
                                                                            
                            Q1-2012   Q2-2012   Q3-2012   Q4-2012   Q1-2013 
# of Deals                     85        78        66        94        54   
Deal Value (US$MM)          $18,897   $11,465   $19,541   $35,650   $13,100 

 
Source: PLS Derrick M&A Database. Only include deals with values
disclosed. 
According to Lidsky, "While deal activity was down, several
large-impact deals provide insight to current market dynamics and
drivers. First, the largest deal for the quarter was Linn Energy's
$4.3 billion buy of Berry Petroleum -- secured by offering a 20%
premium to the prior-day closing price of Berry's stock price. This
deal breaks new ground as it represents the first ever acquisition of
a public C-Corp by an upstream LLC or MLP and opens up a new sector
for MLP purchases, given proper structuring." 
Two other deals highlight the Chinese NOCs buying trend and other
market dynamics. Sinopec paid $1.02 billion for a 50% undivided
interest in Chesapeake's Mississippian Lime play in Oklahoma. The
deal departs from Chesapeake's normal cash-and-carry joint venture
and provided Sinopec with 425,000 net acres at a price of $200 per
acre -- below what many analysts had expected. In the Wolfcamp play
located in the Delaware Basin of west Texas, Sinochem struck a
traditional joint venture with leader Pioneer Natural Resources for
$1.7 billion, implying $19,000 per acre. 
Regarding United States upstream valuations, average multiples for
oil are in the $110,000 per bopd or $23.00 per proved bbl (average
R/P = 14 years) range. For gas, average multiples are $5,300 per
Mcfpd and $1.40 per proved Mcf (average R/P = 11 years). 
Looking Forward  
As of March 31, PLS and Derrick estimate that $116 billion of assets
are on the market, up from the $85 billion tally on December 31.  


 
                                                                            
                                 Table 5                                    
               Q1 2013 Announced Deals in Play > $1 Billion                 
                                                                            
Date      Sellers             Country       Comment                         
03/27/13  Petrobras           Nigeria       Petrobras selling Nigeria       
                                            portfolio                       
03/05/13  RWE                 Multiple      E&P unit for sale               
03/14/13  Hess                Indonesia     Hess divesting assets in        
                                            Indonesia                       
03/14/13  Hess                Thailand      Hess divesting assets in        
                                            Thailand                        
02/14/13  Statoil, Chesapeake United States Marketing Marcellus shale assets
02/14/13  Korea Gas           Australia     Selling 10% interest in         
                                            Gladstone LNG                   
02/10/13  Petrobras           Brazil        Selling its 35% interest in BC- 
                                            10 project                      
01/08/13  Talisman            Canada        Seeking Montney JV              

 
Source: PLS Derrick Global M&A Database.  
The United States has the largest inventory of deals on the market
with an estimated at $35 billion, followed by Canada ($15 billion)
and Australia ($11 billion). 
Notable new deals in play this quarter include Petrobras' intent to
sell its Nigerian portfolio and select assets in Brazil. Canada's
Talisman intends to raise another $2 to $3 billion via sales or joint
ventures and is marketing a Duvernay shale package, parts of its
Montney assets in Canada and reviewing North Sea options. Hess is
selling its portfolio in Indonesia and Thailand. Germany's RWE AG has
hired Goldman Sachs to sell its E&P business. 
PLS, Inc. and Derrick Petroleum services are partners in providing
U.S., Canadian and International clients leading Global and U.S. M&A
and E&P databases and services. These databases are maintained 24/7
by a team of analysts and are accessible via the web. 
Media Contacts:
David Cohen
Managing Editor 
dcohen@plsx.com
PLS Inc. 
Houston, Texas
713-650-1212 
 
 
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