American Oil and Gas Reporter - May 2017 - 33

percent in first-quarter 2017. Three IPOs
of upstream and midstream companies
were completed during the first quarter.
"Privately held companies, including
those backed by private equity, have been
leveraging the market's increased appetite
for oil and gas assets by preparing their
companies for sale or an IPO," the report
states.
Shale Plays Gain Momentum
Shale plays gained further momentum
in the first quarter with 28 announced
deals worth $25 billion. Low-cost production basins with infrastructure dominated shale deals, PwC explains.
In addition to the Permian's 20 deals,
five deals worth nearly $7 billion were
announced in the Eagle Ford, and three
deals worth $293 million were announced
in the Marcellus, according to the report.
There was one deal in the Utica valued
at $133 million and one in the Bakken
for $51.4 million. No deals were registered
in the Niobrara or Haynesville.
For perspective, the Permian's 20
fourth-quarter deals generated $7 billion
more than all deals announced in the
entire year of 2016, when PwC reported
a total of 24 announced deals valued at
$14 billion. Throughout all four quarters
of last year, companies announced 13

Marcellus deals worth $7 billion, nine
Eagle Ford deals worth $2.4 billion, six
Haynesville deals worth $2.6 billion, four
Bakken deals worth $3 billion, and three
Niobrara deals valued at $3.3 billion,
PwC recounts.
"The first quarter was really active,
with the Permian proving to be one of
the hottest basins globally, attracting even
foreign investment. With oil prices hovering around $50 a barrel, and Permian
economics continuing to improve with
breakeven prices plummeting, players in
that basin are making just as much margin
as they were a few years ago," offers
Seenu Akunuri, PwC's U.S. oil and gas
valuation practice leader. "Major players
and international oil companies are changing their strategic portfolio positions, increasing their exposure to onshore acreage.
This is reaffirming that U.S. shale is becoming the swing producer."
PwC says midstream deal value was
dominated by "drop-downs," or corporate
reorganization transactions. The 14 midstream deals announced in the first quarter
were valued at $35 billion, or about 48
percent of the total deal value. It says the
largest deal in the quarter was transacted
in the midstream, contributing more than
$17 billion in value. There were four
other midstream megadeals as well, gen-

erating almost $17 billion.
Announced deal activity in the oil field
services and downstream segments was
relatively subdued with four oil field services
deals worth $615 million, while the downstream segment generated three deals worth
$962 million, according to the report.
Despite the robust first-quarter numbers, PwC notes that headwinds began
emerging near the end of the quarter that
could slow transaction activity, including
increased seller expectations for asset
values. Second-quarter deal activity likely
will be influenced heavily by the ability
of buyers and sellers to bridge the emerging
valuation gap, according to PwC.
"We see a lot of optimism both in the
IPO and high-yield markets," observes
Rob McCeney, a U.S. energy and infrastructure deals partner at PwC. "Companies are showing an interest in entering
the capital market and taking advantage
of higher valuations. However, we could
run into an expectation gap that could
result in tempering the activity in the
quarters to come."
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American Oil and Gas Reporter - May 2017

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