Merger And Acquisition Deals Return To Pre-Covid Levels In 2021

Global upstream merger and acquisition deals rebounded to pre-Covid-19 levels in 2021, reaching a total of $181 billion, a 70 percent increase over 2020, Rystad Energy said.

Rystad stated that the total deal value for 2021 was the highest in three years and almost reached the highs seen in 2017 and 2018 of $205 billion and $199 billion, respectively.

Sellers faced difficulty finding buyers during the downturn in 2020, but that ended last year as big deals made a comeback on high commodity prices and a strengthening market. Deals valued at more than $1 billion accounted for $126 billion, or 70 percent, of the global total. The share of $1 billion-plus deals rose almost three-fold, with 35 such deals announced in 2021 compared with just 13 in 2020.

Out of the $1 billion-plus deals, 13 were company acquisitions together valued at around $65 billion. Two large Australia-focused mergers – one between Santos and Oil Search and another between Woodside Petroleum and BHP – contributed about $22 billion, while other $1 billion-plus company acquisitions were focused on North American assets.

The share of resources sold in deals shifted in 2021, with gas accounting for 56 percent of all traded resources, a sizeable jump from the 43 percent share it had in 2020. Oil accounted for 31 percent, and natural gas liquids came in at 9 percent. This shift was primarily driven by the North American acquisitions in 2021 but was also helped by deal activity in other regions.

“With a strong potential deal pipeline, continuous pressure on companies to transform amid a global push to lower carbon emissions while simultaneously delivering profitable oil and gas production, and an average oil price of above $60 per barrel expected for 2022, the upstream M&A market is likely to stay active for the foreseeable future,” says Ilka Haarmann, senior analyst at Rystad Energy.

Deal breakdown

Company acquisitions totaled $76 billion, around 42 percent of the global announced deal value in 2021, a drop in share compared with 2020 when purchases accounted for about 57 percent of the total deal values.

The largest company acquisition by deal value was the merger of Cimarex Energy with Cabot Oil & Gas, which was valued at about $17 billion. Following suit with most other North American acquisitions announced in 2021, the deal agreement was signed in the year’s first half.

Cimarex and Cabot did not have overlapping asset positions. The same applied for Appalachia-focused independent Southwestern Energy when it acquired Haynesville-focused Indigo Natural Resources for $2.7 billion and when Paloma Partners acquired Goodrich Petroleum for $480 million. Other U.S. company acquisitions saw the merger consolidate the buyers’ existing portfolio positions.

The largest field acquisitions were Aker BP’s announcement to acquire Lundin Energy’s oil and gas portfolio, valued at about $14 billion, and ConocoPhillips’ acquisition of Shell’s Permian Basin position for $9.5 billion. Field acquisitions in the Permian totaled $19 billion in 2021, accounting for more than half of North American field and license acquisitions, which totaled $35 billion. Russian acquisitions amounted to $12 billion, while in Europe, they clocked in at around $24 billion.

Buyers and sellers

The only peer group with positive net inorganic resource growth in 2021 was public companies, while private players and national oil companies divested more resources than they acquired on a net basis. Public companies increased their net resources by about 12 billion barrels of oil equivalent (boe) through acquisitions last year.

However, there are significant discrepancies between different company segments within this group. The top segment in terms of acquiring resources was public independents growing their positions mainly in North America. Among them were Coterra Energy – formed by the merger of Cimarex Energy with Cabot Oil & Gas, Southwestern Energy, EQT Corporation, Chesapeake Energy, and ConocoPhillips.