PwC: Low oil prices might drive surge in restructuring in 2015

Mergers and acquisitions (M&A) in the oil and gas industry hit 10-year highs in terms of deal value and volume in 2014, according to a report from PwC US. The record breaking year was primarily driven by a significant level of deals valued at more than $1 billion, especially in the second half .

Given US light, sweet crude oil prices at less than $50/bbl on the New York market in late January, Doug Meier of PwC said debt levels could drive additional deal activity this year. Leveraged companies will look to strengthen balance sheets, said Meier, PwC’s US energy sector deals leader.

In total, 252 oil and gas deals took place in the US, reaching total value of $321.5 billion in 2014, which included upstream, midstream, and downstream transactions, and involved both transactions for companies and for assets.

Overall, there were 49 mega deals valued at more than $1 billion totaling $266.1 billion during 2014, compared with 24 deals worth $71 billion during 2013.

“While 2014 was a very strong year for oil and gas deal activity, we saw a steady decline in November and December as the drop in oil prices accelerated, contributing to a marked shift in deal sentiment from playing offense to playing defense as companies focused on maintaining liquidity,” said Meier.

Foreign investors continued to show interest in the US. Both deal value and volume were at 10-year highs, contributing 56 deals worth $71.2 billion in 2014. Overall deal volume for foreign investors in 2014 increased 75% compared with the previous year.

More than 100 deals involved shale

PwC calculated 24 deals with values greater than $50 million related to shale plays during fourth-quarter 2014, totaling $57 billion. This represents a 139% increase in total deal value compared with fourth-quarter 2013.

For all of 2014, there were 107 total shale deals that contributed $110.3 billion, a 107% growth in deal value when compared to full-year 2013.

In the upstream sector, shale deals represented 19 transactions and accounted for $14.9 billion, or 76% of total upstream deal volume in fourth-quarter 2014. There were five midstream shale-related deals in the fourth quarter, accounting for $42.1 billion.

John Brady, a Houston-based partner with PwC’s energy practice, noted that, “A sustained low-oil price environment is driving an intense focus on returns and the deployment of assets to the most efficient shale plays.”

The most active shale plays for M&A with transaction values greater than $50 million during the fourth quarter of 2014 were the Bakken and Permian, which each had four deals worth $3.1 billion and $2.4 billion, respectively.

The Marcellus shale contributed three deals worth $5.7 billion. The Eagle Ford in South Texas contributed three deals worth $484 million, while the Niobrara and Haynesville each generated one deal, PwC said.

PwC’s Oil & Gas M&A analysis is a quarterly report of announced US transactions having value greater than $50 million analyzed by PwC using transaction information from IHS Herold.

Contact Paula Dittrick at

*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.

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