Oil, Gas M&A in Upstream Sector Climbs to $37 Billion in 4Q 2014

Gas Assets Take Centre Stage

This lack of oil-weighted deals of course means that gas-weighted deals were the headline-makers in Q4 2014. The biggest of these deals this quarter, in which Repsol agreed to acquire Talisman Energy, was in fact the biggest E&P deal of the year.

Repsol Agrees to Acquire Talisman Energy

In mid-December, Repsol agreed to acquire Canada-based Talisman Energy for a total value of $13 billion, which included $4.7 billion of debt. When the deal was agreed, the price of $8 per Talisman share represented around a 56% premium, a significant price to pay considering the oil prices had well and truly began to tumble at the time, even though Talisman did produce more gas than oil in Q3 2014.

Ever since Repsol was forced into returning its stake in YPF to the Argentine government, the Spanish company has had a rather large gap to fill in its portfolio. Repsol claims that acquiring Talisman is a good fit; it not only bolsters the South American portion of Repsol’s E&P business, but also has attractive asset holdings in North American shale and South-East Asia. Repsol will also be excited by the significant production level and high gas weighting that Talisman brings to the table, both of which will reduce Repsol’s dependency on the higher risk oil production areas of its portfolio, such as Libya, in this low price climate. Whilst many analysts have pointed out Talisman’s failing UK North Sea assets as a huge burden for Repsol to be taking on, the aforementioned positive attributes of Talisman Energy clearly outweigh this and any other negatives in Repsol’s opinion.

KUFPEC Joins Chevron in Duvernay Shale Joint Venture

In the quarter’s other +$1 billion deal in Canada, KUFPEC agreed to join Chevron in the prospective Duvernay shale by acquiring 30% of its assets for $1.5 billion in early October, which includes a cost carry going forward. The exploration wells already drilled on Chevron’s acreage, on which it will remain the operator with a 70% interest, have produced gas in the main, but also a significant level of condensate. Chevron has therefore managed to monetise a liquids-rich asset in a difficult period, while KUFPEC now owns a highly prospective asset that could pay major dividends in the future should prices rebound.

Southwestern Energy Acquires Marcellus Shale Assets

Southwestern Energy is one of the bigger US shale gas producers around, with operations focused in the Fayetteville shale of Arkansas as well as in the Appalachian basin in the north east. It is the company’s portfolio in the latter that was bolstered by acquisitions this quarter, as three deals were agreed for Marcellus shale assets for a combined $5.7 billion.

The first and largest of these deals was announced in October and closed just before year end, as Southwestern agreed to acquire Chesapeake Energy’s Southern Marcellus Assets and a portion of its Eastern Utica assets for just under $5 billion. In December, the company announced two further Marcellus acquisitions from WPX Energy and Statoil, for another $300 million and $394 million respectively. The deals represented an increase in Marcellus acreage holdings for Southwestern of 443,000 net acres, as well as 2.5 tcfe of proved reserves and around 70,000 boe/d of additional production (54% gas). The Marcellus shale has long been sought after, even when gas prices were lower than they are now, due to its close proximity to one of the North America’s main demand centres in the north east as well as the sheer amount of gas on offer for the right producer; Southwestern Energy seems intent on being a major player in the Marcellus for many years to come.

Linn Energy Sells Texas and Oklahoma Assets

In other US unconventional news, affiliates of Enervest Ltd agreed to acquire Linn Energy’s position in the certain tight gas plays, which included the Granite Wash and Cleveland areas, for $1.95 billion. The assets, which also included certain midstream interests, are located in the Texas panhandle and western Oklahoma in the Anadarko basin. The acquirers were intent on bolstering their own portfolios, which are already significantly focused on the areas in question. Linn’s motivation for selling the assets was to fund a $2.3 billion acquisition from Devon Energy that closed in August 2014. In this deal, Linn acquired gas-weighted assets in the Rockies, onshore Gulf Coast and Mid-Continent regions, proving that gas deals in North America for large prices are nothing particularly new this quarter, rather they just stand out more due to the lack of large price oil deals.

Petronas and Statoil agree Largest Deal Outside of North America


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Scott Mashuda  |  January 13, 2015
Mark, Great research and excellent piece. I deal mostly in lower-middle market M&A. I just published an article a few days ago with my prediction for oil & gas M&A in 2015. Id welcome your thoughts A link is as follows: http://www.riversedgealliance.com/blog/oil-and-gas-mergers-and-acquisitions-expected-to-increase-in-the-lower-middle-market-in-2015