PwC US: Eagle Ford, Marcellus most active shale plays for 2Q M&A

Transactions involving unconventional oil and gas assets remained a key driver for deal activity in the second quarter, and midstream shale assets values beat upstream shale deal total for a second consecutive quarter, PwC reported in an analysis of industry's merger and acquisition activity.

In a report released Aug. 6, PwC said transactions greater than $50 million included 15 shale deals worth $7.5 billion, or 44% of total second-quarter deal value. Upstream shale deals represented nine transactions and accounted for $3.1 billion, while six midstream shale deals contributed $4.4 billion.

Buyers are focused on enhancing infrastructure capacity so demand remains strong for gathering assets, Doug Meier, US energy transactions and deals leader for PwC, told Oil & Gas Journal. The analysis excluded pipeline construction projects.

"Well-positioned buyers have the right deal strategies, integration plans, and controls in place to execute quickly on opportunities while successful sellers are providing a clearer and more transparent picture of their assets in order to minimize transaction timing," Meier said.

The most active shale plays for M&A with values greater than $50 million during this year's second quarter included the Eagle Ford in South Texas with three transactions contributing $1.5 billion total, the Marcellus with three deals totaling $416 million, and the Bakken formation in North Dakota with two deals totaling $910 million.

The Utica shale experienced no deal activity for the first time in 7 quarters, PwC said, noting that was not a significant change from the play's historical trend. For transactions worth more than $50 million, the play has averaged one deal during the last 6 quarters, including the 2013 second quarter. Two deals were announced during this year's first quarter.

PwC noted master limited partnerships (MLPs) were involved in seven oil and gas transactions, representing 18% of deal activity for overall second-quarter 2013 US oil and gas transactions. Additionally, in the first half of the year, MLPs participated in 17 deals, or 21% of total deal activity.

MLPs help satisfy certain investors' thirst for yield, said PwC, which expects accelerating deal activity in by upstream MLPs because these companies wish to supplement depleting assets.

Foreign buyers accounted for no announced deals worth more than $50 million during the second quarter, which was a significant change from previous quarters. Four announced shale deals involved foreign acquirers during the first quarter, PwC said.

"Strategically, foreign buyers remain interested in US oil and gas assets," Meier said, adding he expects buyers from outside the US will continue to be active players in US oil and gas.

PwC's M&A analysis is a quarterly report of announced US transactions with value greater than $50 million analyzed by PwC researchers using transaction data from IHS Herold.