American Oil and Gas Reporter - May 2017 - 32

First Quarter Sets M&A Value Record
HOUSTON-The first quarter of 2017
set a new quarterly high in deal value for
oil and gas mergers and acquisitions, according to a report from PwC. Compared
with $28 billion worth of deals in firstquarter 2016, the industry announced
transactions totaling $73 billion during
the first three months of this year.
"Pleased by a pro-energy policy agenda
taking shape, reassured by the relative
steadiness of the price of oil, and encouraged by advances in shale technology,
investors entered 2017 with renewed optimism, resulting in a record $73 billion
in announced deals," the report reads.
That represented a 160 percent increase
in deal value compared with the first
quarter of 2016. In addition, initial public
stock offering preparation activity in-

creased during the first quarter with an
anticipated increase in IPOs in the second
quarter of 2017, according to PwC.
Coming off a fourth quarter that saw
61 announced deals, 2017 started with a
wave of "megadeals" in shale plays,
which PwC says underscored investors'
confidence in the long-term potential of
U.S. onshore production. In all, the company reports that 53 M&A deals worth a
combined $73 billion were announced in
the first quarter, driven by the upstream
sector's 32 deals worth $37 billion. That
represented a 304 percent increase in
deal value, and a 68 percent increase in
year-over-year deal volume from firstquarter 2016 (Figure 1).
Asset deals dominated first-quarter
activity, continuing the trend established

FIGURE 1
Percentage of First-Quarter 2017 Deals by Industry Sector

FIGURE 2
Oil and Gas Deal Volumes and Values (Q2 2015-Q1 2017)

32 THE AMERICAN OIL & GAS REPORTER

in the fourth quarter, when half of all
deals were shale-related and demand was
particularly strong for assets in the Permian
and Marcellus. The Permian Basin was
again the most active shale region with
20 deals valued at $21 billion, setting a
quarterly high for the Permian. The report
points out that Permian operators not
only expanded their acreage positions
within the basin, but also announced several megadeals in the first quarter.
"2017 M&A activity started at a blistering pace, with $49 billion of announced
deals in January alone-40 percent higher
than the total for any of the previous first
quarters since 2010," comments Doug
Meier, U.S. oil and gas sector deals leader
at PwC. "As the quarter progressed, we
sensed that there was a little bit of a pullback. Did seller optimism get a little
ahead of the market? Did we have a little
too much enthusiasm for the recovery
and for what that enthusiasm meant for
valuation?"
Upstream Megadeals
Eleven megadeals worth $62 billion
total were a major contributor to the increase in year-over-year quarterly deal
value, according to the reports. Six of
those transactions were in the upstream,
generating $29 billion, while the other
five were in the midstream segment. This
was in contrast to fourth-quarter 2016
activity, when midstream deals had accounted for the majority of both total
deal value and megadeal activity, PwC
notes.
While the numbers were record setting
for a first quarter, both the number of
deals and the total value of the announced
deals were actually down from the fourth
quarter of 2016, which saw 61 deals worth
$91 billion (Figure 2). Of those 61 fourthquarter deals, 30 were in shale plays and
accounted for $21 billion, PwC reports.
The 53 deals announced in the first
quarter of 2017 averaged $1.3 billion per
deal, compared with the $718 million per
deal average for the 39 transactions announced in first quarter of 2016 and $1.5
million per deal in the fourth quarter, the
firm says.
Consistent with the historical trend,
PwC says strategic investors generated
45 of the 53 first-quarter deals worth $69
billion. Financial investors accounted for
eight deals worth $4.5 billion.
Private equity volume as a percentage
of total deal volume was lower both sequentially and on a year-over-year basis,
PwC notes, falling from 26 percent of
deal volume in first-quarter 2016 to 15
American Oil and Gas Reporter - May 2017

Table of Contents for the Digital Edition of American Oil and Gas Reporter - May 2017
