$42 Billion in Oil & Gas Deal Announced Third Quarter 2013

$42 Billion in Oil & Gas Deal Announced Third Quarter 2013 
After Slow Start, Upstream Deal Activity Back to Tracking Normal
HOUSTON, TX -- (Marketwired) -- 10/11/13 --  PLS Inc. 

--  Total value of global transactions up nearly 60% from Q2.
--  US value up 40%; Europe and Canada rebound.
--  Africa and South America continuing strong.
--  Inventory of Deals in Play stabilizes at $135 billion.
--  NOCs and Private Equity most active set of buyers.
--  China snaps up 25% of the global market.
--  US valuation benchmarks are $110,000/boepd and $5,800/Mcfepd.
--  North American deal market reflects impact of large capital needs for
    resource play development.

PLS Inc., a Houston-based research, transaction and advisory firm, in
conjunction with its international partner Derrick Petroleum
Services, announced that global upstream oil and gas M&A activity for
Q3 2013 totaled $41.8 billion in 150 separate transactions (with deal
value disclosed). This is up 59% from Q2 totals of $26.4 billion in
168 deals and down 19% from Q3 2012 totals of $51.3 billion in 155
deals. For comparison, the Q3 total of $41.8 billion is down a
nominal 3% from the quarterly average recorded since 2007. For deal
counts, Q3's tally of 150 deals is also down a nominal 4% from
quarterly averages since 2007. 
Brian Lidsky, PLS Managing Director, stated, "This year, the oil and
gas deal market started slow after an unusually busy Q4 2012 which
saw 238 deals for $138 billion. However, both the pace and dollar
amount of deals has consistently increased throughout this year
culminating in a Q3 total of $42 billion in 150 deals -- a level of
activity on par with quarterly averages since 2007. Furthermore,
looking forward we expect the final quarter of 2013 to trend above
average for deal activity." 
Driving heightened activity in Q3 are several factors including a
high deal inventory level along with a healthy level of buying
interest from NOCs and private equity. Looking at sellers, there is
motivation to divest conventional legacy producing assets as well as
sell down interest in large world-class global discoveries. The
capital raised from these transactions will be used to help fund
increasing capital plans including, but not limited to, North
America's resource pl
A stark example of this trend in Q3 was Apache Corporation's sale of
$7.2 billion of assets through a series of rapid transactions which
far surpassed its initial goal of $4 billion. Apache will use the
proceeds to repay debt, buy back shares and accelerate resource play
development, primarily in the US where it is enjoying rapidly growing
production in the Permian and Mid-Continent regions. First, Apache
sold its legacy Gulf of Mexico shelf portfolio to Fieldwood Energy
LLC, backed by PE firm Riverstone, for $3.75 billion in mid-July.
Next, in mid-August, Ember Resources bought a conventional package in
Canada from Apache for $214 million. Two weeks later Apache sold
one-third of its Egyptian holdings to Sinopec for $3.1 billion. And
finally, in mid-September, Apache sold another two Canadian
conventional deals for $112 million.   

                                   Table 1                                  
                 Quarterly Global E&P Mergers & Acquisitions                
                       Q3-2012    Q4-2012    Q1-2013    Q2-2013    Q3-2013  
           Deal Count    155        238        136        168        150    
   Deal Value (US$MM)  $51,301    $138,379   $22,657    $26,381    $41,826  

Source: PLS Derrick M&A Database. Only includes deals with price
Regional Breakdown  
Regionally, North America's $15.9 billion in oil and gas M&A activity
(Table 2) continued to lead the global M&A market with a 38% share,
albeit down from 42% in Q2 and down from an average 56% share since
North America is followed by the FSU (28%) and Africa (16%) as the
globe's most active regions for deals. Noteworthy regional rebounds
this quarter occurred in Europe and Canada. In Europe (including the
North Sea), deal activity rebounded to $2.9 billion from just $0.5
billion in H1 2013. Historically Europe/North Sea tallies about $1.8
billion in deals quarterly. Canada also rebounded to $3.7 billion
compared to $2.9 billion in H1 2013. While up, the pace in Canada
still lags the $7.6 billion in deals announced quarterly since 2007.  
Africa remains a bright spot with a 16% share of global value. Prior
to 2013, Africa captured just 6% of global deal value. South America
is also running strong with an 11% share compared to 5% historically.
In the FSU, deal value surged to $11.6 billion and the region
captured a 28% share. The largest FSU transaction in Q3 is
ConocoPhillips' $5 billion sale to CNPC of 8.4% interest in
Kazakhstan's Kashagan field. 

                                   Table 2                                  
                Global Oil and Gas M&A Deals - Q2 and Q3 2013               
                                  Q2 2013    Q2 2013    Q3 2013    Q3 2013  
Continent                        Deal Value Deal Count Deal Value Deal Count
                                  (US$MM)               (US$MM)             
Africa                          $5,794          8     $6,486          7     
Asia                            $438            4     $386            7     
Australia                       $146            6     $109            6     
Europe                          $185            7     $2,946          11    
Former Soviet Union             $6,659          10    $11,583         6     
Middle East                     $0              0     $0              0     
North America                   $10,945        124    $15,886        105    
South America                   $2,215          9     $4,430          8     
TOTAL                           $26,381        168    $41,826        150    

Source: PLS Derrick M&A Database. Number of deals above is for deals
with price disclosure. Deal count totals including those without
price disclosure are 296 in Q2 and 239 in Q3. 
According to Mangesh Hirve, Director, Derrick Petroleum Services,
"Global NOCs, including China, continue to scour the globe to secure
long-term oil and gas supplies. In particular, Asian NOCs' buying
continues unabated. This quarter saw another $13.4 billion of buying
by Asian companies, of which $10.5 billion (or 25% of the global
market) is from China followed by $2.6 billion from India. Just this
quarter, China bought large deals in Kazakhstan, Egypt and Brazil.
Since 2007, China has bought $136 billion in oil and gas deals or 12%
of the market." 
There were 11 deals which topped the $1 billion threshold during Q3,
up from six in the previous quarter and equal to Q3 2012. Noteworthy
this quarter is the global diversity of these large deals, which
occurred in eight countries.  

                                   Table 3                                  
                      Q3 2013 Global Deals > $1 Billion                     
Date        Buyers                Sellers          Deal Value  Country      
09/09/13    CNPC (China)          ConocoPhillips   $5,000      Kazakhstan   
07/18/13    Fieldwood Energy LLC  Apache           $3,750      United
08/29/13    Sinopec               Apache           $3,100      Egypt        
07/02/13    Rosneft               Itera            $2,900      Russia       
08/19/13    OMV                   Statoil          $2,650      Norway       
08/25/13    ONGC (India)          Anadarko         $2,640      Mozambique   
09/24/13    Rosneft               Enel SpA         $1,800      Russia       
08/16/13    Sinochem              Petrobras        $1,543      Brazil       
09/29/13    Pacific Rubiales      Petrominerales   $1,529      Colombia     
09/04/13    Oasis Petroleum       Roda, Zeneco     $1,450      United States
09/27/13    Rosneft               Alrosa Co. Ltd.  $1,380      Russia       

Source: PLS Derrick M&A Database 
United States - Q3 2013  
US deal activity in Q3 2013 declined 24% to 68 transactions compared
to 90 in Q2 2013. However, deal value bounced back with an increase
of 40% to $12.2 billion compared to Q2 2013. 

                                   Table 4                                  
                  United States E&P Mergers & Acquisitions                  
                       Q3-2012    Q4-2012    Q1-2013    Q2-2013    Q3-2013  
           # of Deals     74        116         67         90         68    
   Deal Value (US$MM)  $19,882    $37,918    $13,359     $8,797    $12,229  

Source: PLS Derrick M&A Database. Only includes deals with values
According to Lidsky, "The biggest US deal this quarter is the $3.75
billion sale of Apache's Gulf of Mexico shelf assets to Fieldwood
Energy. This deal is noteworthy on several fronts. First it
immediately vaults Fieldwood into operating the largest GOM shelf
asset base with current production of 95,000 boepd. Second, the
transaction amplifies the role of private equity in today's markets.
Fieldwood is backed by PE firm Riverstone and according to Fieldwood,
the deal represents Riverstone's largest single investment. Lastly,
the deal represents a noteworthy change for Apache which, over a span
of 30 years, had operated in the Gulf of Mexico shelf to build the
company into where it is today. Now Apache's growth is in large part
coming from US onshore resource plays. This is a trend in the US
markets which is not unique to Apache."  
Other continuing themes in the US during Q3 were high activity in
oily onshore resource plays. Outside of the Gulf of Mexico, the most
active area in Q3 was the Bakken. Since May 2007, there have been 249
deals totaling $24 billion, with 14 deals for $2.0 billion in Q3. The
largest deal is Oasis Petroleum's $1.45 billion buy from privately
held Roda Drilling and Zenoco Inc. Oasis also completed three
additional Bakken buys for another $65 million. Following the Bakken,
the next most active region is the Eagle Ford with $1.2 billion in
nine deals, the largest of which is Exco's $681 million purchase of
Chesapeake's South Texas assets. Exco also bought Chesapeake's
Haynesville assets during this quarter for $316 million. 
Regarding upstream valuations in the US, current benchmark multiples
for PDP-weighted conventional assets are down slightly for oil and up
slightly for gas. Using our proprietary screen, oil-weighted asset
multiples today are $110,000 per boepd or $18.75 per proved boe with
an average R/P of 16 years (versus last quarter's $120,000 per boepd
or $22.50 per proved boe and average R/P of 16 years). For gas, the
multiples are $5,900 per Mcfed and $1.50 per proved Mcfe with an
average R/P of 11 years (versus last quarter's $5,800 per Mcfed and
$1.75 per proved Mcfe with an average R/P of 10 years). 
Looking Forward 
Also using our proprietary analytics, on October 1 the rapid growth
of the inventory of deals in play has stabilized and now totals $135
billion, up just $2 billion from $133 billion on July 1. The tally
stood at $116 billion on March 31 and $85 billion on December 31. 

                                 Table 5                                    
           Select Q3 2013 Announced Deals in Play > $1 Billion              
Date      Sellers       Country        Comment                              
09/04/13  KNOC          Canada         Harvest Operations mulling options   
07/25/13  Marathon      Libya          Marathon Oil to sell interest in     
                                       Libya asset                          
09/29/13  Shell         United States  Shell to sell Eagle Ford assets      
09/16/13  Imperial Oil  Canada         Imperial Oil to sell assets in       
                                       Western Canada                       

Source: PLS Derrick M&A Database 
The United States has the largest inventory of deals in play with an
estimated $33 billion (down from last quarter's $37 billion),
followed by Canada with $25 billion (up from $17 billion), Russia
with $15 billion (same as last quarter) and Brazil with $13 billion
(down from $15 billion). 
New deals in play include Korea's KNOC with media reports stating
that the company is reviewing the sale of part -- or perhaps all --
of Harvest, a Canadian company KNOC purchased for $4.0 billion in
October 2009. Surprising the markets this quarter is an announcement
by Shell that it is looking to shed its Eagle Ford assets. In May
2010, Shell leased the Harrison Ranch in South Texas for $1.0 billion
($9,400 acre), and it is now producing about 93.6 MMcfed (40%
liquids) from its Eagle Ford assets. Shell is also looking to sell a
substantial onshore position from its Nigeria portfolio. Other major
companies putting assets on the market include Marathon reportedly
looking to sell its Waha oil concession in Libya currently producing
38,000 boepd (89% oil). In Canada, Imperial Oil is marketing
properties currently producing 15,600 boepd (51% oil). 
PLS Inc. and Derrick Petroleum Services provide US, Canadian and
International clients leading US, Canada and International M&A
databases and services. These databases now cover the upstream,
midstream, downstream and OFS sectors and are maintained 24/7 by a
team of analysts and are accessible via the web at www.plsx.com/ma. 
Media Contacts:
Brian Lidsky
Managing Director 
David Cohen
Managing Editor
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