Mergers and acquisitions in the oil and gas space in the U.S. declined in the third quarter after hitting a two-year high in the second quarter, according to data analytics firm Enverus.
Enverus analysts said that the total value of M&A deals during the third quarter was 44 percent lower than the total value of second-quarter deals. However, it was still higher than the five-year average for the third quarter, at $18.5 billion versus $16 billion, excluding the Occidental/Anadarko tie-up.
“We have seen a red-hot market for upstream M&A since the industry recovered its footing from the initial shock of COVID-19,” said Andrew Dittmar, director at Enverus, in a news release. “It was inevitable that the hungriest buyers and sellers would find their deals and activity would revert back toward the average. We seem to be hitting that inflection point.”
The biggest deal during the last quarter was Conoco’s purchase of Shell’s Permian assets for $9.5 billion, followed by Chesapeake’s takeover of Vine Energy for $2.7 billion. The rest of the deals agreed to during that quarter were all below a billion dollars in value.
Yet more deals may be on the way now that the outlook for the industry is improving fast amid an increasingly global energy crunch. And the shale patch remains a top pick, it seems.
“Private equity still has dry powder for deals,” Dittmar remarked. “They are using this to target assets being tagged as non-core by public companies. Once you step out of the core of the Permian Basin and a few other key areas, competition for deals drops, and these positions are often available at buyer-friendly price points. That said, private equity is still a net seller in the space and likely to remain so for the foreseeable future given the number of investments outstanding and how long that capital has been deployed.”