M&A up in the US

Merger and acquisition activity in the US oil & gas sector picked up steam 3Q 2010, despite ongoing uncertainty about business in the Gulf of Mexico, reported PricewaterhouseCoopers.

For the three-month period ending 30 September, there were 39 deals worth more than $50 million each for a total of some $17.6 billion, an increase of almost 20% over the $14.7 billion in M&A activity involving 30 deals worth $50 million or more in 3Q 2009, PwC said, attributing the rise to ongoing efforts among companies ‘to reorder their portfolios, continuing interest by non-US oil companies in shale plays, and the expansion of product lines and markets served by equipment and service companies’.

According to PwC’s analysis, upstream asset focused deals accounted for 71% of deal volume and 57% of value in 3Q 2010. US shale gas plays represented some 25.7% of the quarter’s $17.6 billion in deal value, a trend PwC chalked up to companies looking to secure their positions for the longer term and to gain access to developing technology.

The moratorium on deepwater drilling imposed after the Deepwater Horizon disaster, which was lifted in October, has led to a degree of hedging in capital budgets, said Michael Collier, US leader of PwC’s energy M&A practice.

‘There is a healthy level of deal volume around divesting of non-core assets as companies look to maximize their return on capital deployed and raise funds to continue their development efforts, particularly in the shale plays,’ Collier explained.

‘As for the Gulf, players are in the process of deciding whether they will be in or out, and while the moratorium was technically lifted recently, there is still a de facto moratorium as permits remain difficult to secure. Drilling activity in the Gulf will take time to fill in, and we’re seeing capital budgets being set for 2011 that assume very low activity.

‘Companies are actively working on the decision to either leave the Gulf or ride out the storm.’

For the first nine months of 2010, there were 141 deals with reported value greater than $50 million, representing $100.4 billion, PwC said. In the same period last year, there were 70 transactions worth $50 million or more for a total $34.9 billion. OE

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