HOUSTON, Nov. 2, 2011 /PRNewswire/ — PLS, Inc. and Derrick Petroleum Services report that total global oil & gas transaction value for the third quarter 2011 jumped to $43 billion in 166 transactions with deal values disclosed, up 53% from the second quarter value of $29 billion. The market for new deals is well supplied, tallying over $90 billion of deals currently in play. According to Reid Strand, M&A Analyst with Houston-based PLS, Inc., “The trend of larger companies buying first movers in unconventional plays continues with BHP stepping up last quarter with the $15 billion purchase of Petrohawk. Also significant, the Utica Shale in Ohio hit the front burner with Hess striking a $593 million JV with Consol Energy.”

In Q3 2011, transaction value in the US increased by 72%, to $24.5 billion from $14.3 billion in the previous quarter. The sharp rise in value can primarily be attributed to BHP’s acquisition of Petrohawk for $15.1 billion which scores as the third largest global transaction recorded since 2007, trailing ExxonMobil’s $41 billion buyout of XTO Energy and the $18 billion merger of Suncor and Petro-Canada. In Canada, transaction value for the quarter held steady at $3.9 billion, nearly identical to Q2 2011. Overseas activity recovered slightly to $15.7 billion and is up 48% from the first quarter. Transaction value in the North Sea/Europe nearly doubled to $7.6 billion from $3.8 billion in the previous quarter. The balance of international activity was scattered largely across Central-South America ($2.9 billion), the Middle East ($2.9 billion) and Australia ($1.7 billion).

Corporate deals accounted for 67% of deal value in the quarter. According to Yashodeep Deodhar, CEO Derrick Petroleum Services, “Volatile oil prices and uncertain market sentiment usually makes it easier to acquire companies rather than assets. This trend was observed in 2009 when the share of corporate deals shot up to 73% from an average historical rate of around 40%.”

The hydrocarbon mix was heavily gas-weighted; 62% of value was gas transactions, 21% in oil, and the remaining 17% a mix of oil and gas. Of the 166 transactions, 42 were more than $100 million and 15 were more than $500 million. Deals for unconventional resources totaled $26 billion for 60% of total.

US activity up 72% by deal value

In the US, 56 deals were announced for $24.5 billion. Excluding the BHP/Petrohawk deal, value was fairly spread out, with the largest concentration occurring in the Marcellus at 16% of total. Corporate transactions accounted for 69% of deal value, followed by 19% for JVs and 11% traditional property deals, with acreage and royalty deals evenly splitting the remaining 2%. Not surprisingly, 90% of total deal value was classified as unconventional, as Majors and International firms continue to assemble large positions in resource plays. Gas transactions overshadowed oil transactions, encompassing 80% of total transaction value, while only 4% was classified as oil. Mixed hydrocarbon transactions accounted for the remaining 16% of deal value.

Canada lacks big deals

Canadian deal making continues to lag well behind 2010 levels. Activity levels have held fairly steady, with 38 transactions totaling $3.9 billion in the quarter, but large deals make up much less of the mix in 2011. For comparison, through the first three quarters of 2010, Canada saw 45 deals greater than $100 million for a total of $25.4 billion; in 2011, there have been 23 deals greater than $100 million for a total of $9.4 billion. Total transaction value for 2011 is on pace to drop 61% from last year.

International activity bright spot is UK North Sea

Overseas deal making rebounded slightly from Q2 but still trails 2010 levels. Similar to Canada, activity levels have increased but large deals have been few and far between. There were only six deals greater than $500 million during the quarter, with only the United Kingdom having more than one. Also, only six countries saw more than $500 million in total value, including Argentina, Australia, Brazil, Iraq, Norway and United Kingdom. Even with a fairly slow 2011, expectations are that international activity will rebound in the near term. Of the $90 billion of deals in play, $50 billion are overseas. According to Anders Witteman, Norway-based partner of Derrick, “North Sea activity saw a marked change with GDF SUEZ sale to China Investment Corp. bringing Chinese investors closer to the North Sea than ever before; ExxonMobil’s sale of the mature Mobil legacy portfolio to Apache for a repeat of the 2003 BP Forties deal; and Premier’s acquisition of EnCore is evidence of value creation from exploration in the North Sea.”

PLS, Inc. and Derrick Petroleum Services are partners in providing U.S., Canadian and International clients leading Global and U.S. M&A databases and services. These databases are maintained 24/7 by a team of analysts and are accessible via the web. To access the full report, please visit www.plsx.com/ma.

Media Contact:
Reid Strand, M&A Analyst, PLS, Inc. 713-650-1212, rstrand@plsx.com

SOURCE PLS, Inc.