HOUSTON – First-quarter oil and gas deal-making in the U.S. reached its highest level in more than a decade, as Big Oil companies discarded assets to focus on their core operations.
From January to March, typically a slow period for mergers and acquisitions, foreign investors and private equity buyers drove a surge of deals for small or more mature oil-producing assets in the onshore United States and the Gulf of Mexico, according to a report released Wednesday by PricewaterhouseCoopers.
The New York accounting firm reported 43 oil and gas deals worth a combined $19.8 billion in the first quarter — a higher number of deals than the first quarter of 2013 but a decrease in combined value as larger oil companies hive off smaller chunks of their U.S. assets.
“Divestitures are driving activities as companies continue to back their core operations,” said Doug Meier, the U.S. energy sector deals leader for PricewaterhouseCoopers. “They’re shedding those non-core assets to reinvest in their core business or make profits available to shareholders.”
Deals for oil-producing assets accounted for 63 percent of the activity, and $14.2 billion in value. Four deals for pipeline and energy storage assets brought in $1.3 billion.
Meanwhile, oil field services deals picked up, accounting for $2.3 billion in activity — about four times its value in the same period last year. Three deals in the petroleum refining and chemical manufacturing sector were worth a combined $2 billion, according to PricewaterhouseCoopers.
The buyers, mostly private investment funds and international firms, are taking advantage of the buyers’ market, finding prices that work strategically for their portfolios, Meier said. Private equity firms, he said are dispatching more capital to oil fields because the opportunity to sharpen operations and make profitable returns has increased.
Private equity-backed Fieldwood Energy, for instance, bought oil reserves in the shallow waters of the Gulf of Mexico for $750 million in February, adding to the $3.75 billion in assets that it bought from Apache Corp. last year. There were five Gulf of Mexico deals worth $3.9 billion in the first quarter, compared to two in the same period last year.
The Gulf outpaced even the most active U.S. shale play, the Eagle Ford Shale in South Texas, which had five deals worth $3 billion in the first quarter. The Eagle Ford was followed by the Bakken Shale in North Dakota and the Permian Basin in West Texas, which each had three deals. The Bakken deals were valued at $863 million all together, while the Permian Basin deals were worth a combined $276 million.
Foreign buyers made 12 deals worth a combined $8.3 billion, about 42 percent of the deal activity in the U.S., the firm reported. That’s about twice the money the international companies paid for U.S. oil land in the first quarter of 2013.
For Big Oil companies hawking small or unprofitable property, “it’s all about maximizing shareholder value,” Meier said. Oil companies have generally taken two approaches: They’ll either reinvest their sale proceeds in more lucrative assets or they’ll boost dividends, he said.
“The common link of both if those strategies is to build shareholder value,” he said. “Clients are asking us to help them evaluate their strategic operations as to what’s core and what’s not core.”
Nati Harnik / AP
10. $9.2 billion
In March 2011, Berkshire Hathaway announced plans to buy Wickliffe, Ohio-based specialty chemicals company Lubrizol in an all-cash deal.
[photo: Warren Buffet, chairman and CEO of Berkshire Hathaway]
9. $9.3 billion
In June 2011, Dallas-based Energy Transfer Equity announced plans to buy Houston’s Southern Union Co. in a stock deal, creating one of the largest natural gas pipeline companies in U.S.
[photo: The Travis Tower, or 1300 Main, in downtown Houston was purchased by Dallas-based Energy Transfer Partners in August 2011.]
8. $10.2 billion
In April 2011, Exelon Corp. agreed to buy Constellation Energy Group Inc. in a stock deal led by CEO John
Rowe, then the longest-serving utility CEO in the country.
[photo: Then- Exelon Corp. CEO John Rowe]
Plains Exploration and Productio
7. $10.2 billion
In December 2012, global mining powerhouse Freeport-McMoRan Copper & Gold Inc. announced plans to buy Plains Exploration and Production Co. in a cash and stock deal, making a big and risky jump into the oil and gas business.
[photo: A Plains Exploration and Production Co. worker retrieves data from a well in the Inglewood oil field in Los Angeles.]
Isaac Brekken / Getty Images for National Clean
6. $10.4 billion
In May 2013, Berkshire Hathaway’s MidAmerican Energy utility announced plans to buy Nevada electric and natural gas company NV Energy in a cash deal that expanded the footprint of Warren Buffet's company in the energy sector.
[photo: NV Energy President and CEO Michael Yackira speaks during the National Clean Energy Summit 6.0 at the Mandalay Bay Convention Center on August 13, 2013 in Las Vegas, Nevada.]
TOM REEL / San Antonio Express-News
5. $12.3 billion
In February 2010, oil field services giant Schlumberger announced plans to buy Houston-based drill bits maker Smith International in an all-stock merger.
[photo: In 2012, Robert Drummond, President of Schlumberger North America, (left) talks about his company as Jeremy Aumaugher, South Division Operations Manager,listens.]
Jake Lacey / Jake Lacey
4. $14.9 billion
In July 2011, BHP Billiton announced plans to buy Petrohawk Energy Corp. in an all-cash deal that made the Australian company a bigger player in U.S. onshore energy production.
[photo: A Petrohawk Energy Co. drilling site at the Eagle Ford Shale in McMullen County, Texas.]
Nell Redmond / AP
3. $25.5 billion
In January 2011, Duke Energy Corp. announced plans to buy its North Carolina rival Progress Energy Inc. in a stock deal that would create one of the nation's largest utilities.
[photo: Duke Energy's Charlotte, N.C. corporate headquarters in Feb. 1, 2006]
2. $37.6 billion
In October 2011, Kinder Morgan announced plans to buy El Paso Corp., a Houston-based natural gas producer and pipeline owner in a cash and stock deal. The acquisition encountered regulatory challenges, but eventually created the nation's largest network of pipelines.
[photo: Rockie Express Pipeline]
Matt Nager / Bloomberg
1. $41.4 billion
In December 2009, Exxon Mobil announced plans to buy Fort Worth, Texas-based XTO Energy in a stock deal, making a major bet on the future of natural gas. Exxon Mobil is now the largest producer of natural gas in North America.
[photo: A flag flies otuside the headquarters building of XTO Energy Inc. in Fort Worth, Texas, U.S., on Monday, Dec. 14, 2009.]