Breaking Down US Lower 48 Oil and Gas M&A Activity
By Ryan Long
Looking at all oil and gas transactions since 2014, the number of U.S. Lower 48 and Gulf of Mexico (GoM) merger and acquisition (M&A) deals have been extraordinary. Out of a total 1,828 transactions, as of May 10, 2018, three regions have dominated the number of transactions. Figure 1 shows the breakdown of transactions based on region. The Permian had the most with 404, followed by the Rockies with 337 and then the Midcontinent region with a total of 321 transactions rounding out the top three.
(Figure 1 - Number of Transactions)
Nearly $300 billion of capital has been spent in the Lower 48 and GoM over the last four years. Not every transaction discloses a price; however, if these numbers were known, it can change the value for each region and the dollar-per-acre (dollar/acre) average. By no surprise, the Permian region leads the pack with an astonishing $91 billion in total value—more than double than the next closet region in the Rockies with a $43 billion in transaction value. Figure 2 shows the breakdown of the transactions with a disclosed deal value.
(Figure 2 - Deal Value in $MM)
The Midland and Delaware basins in West Texas and New Mexico have the highest dollar/acre—more than doubling what the average is in the Eagle Ford. Midland leads the pack with an average of $25,281 per acre with the Delaware averaging $22,289 per acre. Figure 3 shows the breakdown of the dollar/acre on transactions and the U.S. shale play that they fall into. We have seen a shift in the way transactions are funded. In the past, most companies used banks and public funds (i.e., stock market), but in the last few years private equity has been funding more and more deals.
(Figure 3 - $ per acre)
Most of the transactions have been acreage purchases or corporate buyouts. These transactions have accounted for about 75% of the deals over the last four years. Figure 4 shows the transaction breakouts by deal type (acreage, corporate, joint venture, property and royalty). It is worth noting that property deals are the same as asset deals (Proved Developed Producing or “PDP”, properties and undeveloped acreage), while acreage deals are just solely acreage trades.
(Figure 4 - Type of Deal)
Shale development is the primary driver of North American upstream oil and gas deal flow. New well productivity gains, drilling efficiency, expanded pipeline takeaway capacity and improved commodity prices forebode better margins and economics for upstream energy companies in 2018.
About the Author:
Ryan Long is a Geoscience Technician for Ralph E. Davis Associates, an Opportune LLP company, based in Houston. Prior to joining Ralph E. Davis, he worked for Credit Suisse in the Energy A&D group as a GIS/Geoscience Associate. Prior to Credit Suisse, he worked as a Geoscience Technician in the Deepwater Gulf of Mexico with Venari Resources and on the exploration team in the U.S. Gulf of Mexico and Permian Basin for Apache and Mariner Energy. Ryan earned a Bachelor of Business Administration degree in Business/Commerce at the University of Houston.