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US oil and gas M&A activity highest in Q2 2010 since Q3 2008: PwC

https://www.chemnet.com   Aug 05,2010
Merger and acquisition activity in the US oil and gas sector reached its highest level in more than a year and a half during the second quarter, according to a report issued Wednesday by PricewaterhouseCoopers.


With improved credit markets and buyer-seller expectations finally aligning, coupled with increased CEO confidence and stabilized commodity prices, the US oil and gas sector saw a total of 142 announced deals in Q2, the highest volume for deals seen since Q3 2008, just before the recession began. At that time the total number of announced deals was 190. Total value for Q2 2010 amounted to $36.9 billion, compared with $13.7 billion in Q2 2009, representing a 169% increase year over year. IHS Herold participated in the research.


For the first six months of 2010, there were 262 announced deals in the sector, a 27% increase over the number of deals in the same period last year. A sequential quarter-over-quarter comparison shows deal activity continues to be robust with an 18.3% increase over Q1, which included 120 announced transactions at a value of $32.5 billion.


Upstream asset-focused transactions dominated deal activity, comprising 67% of total deal value in the quarter, along with the largest total deal volume at 80%.


"Deal activity in the sector rebounded significantly in the second quarter, and we expect the momentum to continue throughout the second half of the year," said Michael Collier, leader of the US energy M&A practice at PwC. "As commodity prices and equity markets continue to stabilize, senior managers are showing greater inclination to do transactions today than we've seen over the past two years. At the same time, buyers and sellers are more aligned when it comes to valuations, which is helping to drive the market and to ultimately get deals done."


For Q2 this year, asset sales represented 85% of deal activity compared with just 15% coming from sales of entire companies. That was due in part to oil and gas companies quitting conventional commitments to focus on unconventional resources, according to PwC. There were $13.4 billion worth of deals related to assets sales involving non-US entities taking positions in shale gas, and unconventional assets. Foreign buyers made up more than 25% of the transactions in the quarter, up from 21.6% during the same period last year. Inbound transactions by China-based companies accounted for $900 million in M&A deals, demonstrating China's continuing search for energy.
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