US Upstream M&A Deal Value for 2018 Highest in 4 Years

US Upstream M&A Deal Value for 2018 Highest in 4 Years
A new report by Drillinginfo reveals $84 billion worth of upstream M&A deals, making it the highest total since 2014.

U.S. upstream M&A deals totaled $84 billion in 2018, marking the highest total since the onset of the oil and gas downturn in 2014, according to data released Jan. 8 from Drillinginfo.

The second half of 2018 fueled the surge with a record-setting $32 billion worth of deals in 3Q 2018 and $21 billion in 4Q 2018.

The pace of consolidation amped up in late 2018 with corporate-level deals making up more than 70 percent of the $21 billion deal value in the fourth quarter.

“Investors continue to demand that companies deliver a clear line-of-sight to positive free cash flow,” Drillinginfo M&A analyst Andrew Dittmar, said in a report emailed to Rigzone. “Scale is one piece of the puzzle on how to get there given efficiencies in developing larger acreage blocks, optimizing supply chain logistics to lower costs and G&A [general and administrative expenses] savings. Wall Street no longer supports growth for growth’s sake and is ready to punish buyers who do deals without a clear profit strategy.”

Corporate-level M&A in late 2018 also cut into private equities’ share of deal activity. In 4Q 2018, private equity’s share of acquisitions fell to just seven percent. Additionally, private equity accounted for only four percent of sold deals in 4Q 2018.

Drillinginfo lists the top 10 deals of 2018:

Outlook for 2019

Drillinginfo identified the following as things to look out for regarding U.S. upstream M&A:

  • A launch of several non-core asset sales from public E&Ps with BP plc likely leading the charge
  • Private equity is expected to reemerge as a key buyer on asset deals with willingness to pay for PDP and take risk on upside
  • Markets will reward scale and low-cost leaders, making richer equity currency for large players to make accretive buys of smaller players
  • It can’t be determined yet if a rapid drop in oil prices will affect the closing of 4Q 2018’s corporate deals
  • Leveraged E&Ps are likely to find themselves under renewed pressure to take action to improve balance sheets


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