Shale holds large piece of $45B M&A activity in 1Q11

Of the 45% attributed to North American deals, nearly 78% is related to shale resources 

By Oil & Gas Financial Journal staff

Globally, merger and acquisition deals in the upstream oil and gas sector reached US$45 billion in the first quarter of 2011, and unconventional resources, specifically shale resources, are still leading the way, according to data from Evaluate Energy.

The numbers are in stark contrast to the smaller transaction totals over the past three years as the recession took its toll on both number of deals and deal metrics. The $45 billion, according to Evaluate Energy’s Global M&A database which tracks all global E&P deals on a daily basis, is “higher than all but three quarters over the past three years,” noted the company.

And the driving force? Shale.

Forty-five percent of the deal value generated in 1Q11 is attributed to North American deals. Of this activity, worth $20 billion, nearly 78% is related to shale resources and over half of the deals involved an international player.

China is now well-rooted in the North American shale plays and once again, in 1Q11, took a significant step towards developing the technology that will help secure its energy future and possibly help unlock its own resources. 

In the largest deal of the quarter, PetroChina paid C$5.4 billion to Encana to establish a 50/50 joint venture in which PetroChina earns a 50% interest in Encana's Cutbank Ridge assets in the Montney Shale in British Columbia and Alberta. The interest represents current daily production of about 255 million cubic feet equivalent per day, proved reserves of about 1.0 trillion cubic feet of natural gas equivalent (tcfe), as at the end of 2010, and about 635,000 net acres of land straddling the British Columbia and Alberta boundary.

Australia’s BHP Billiton paid US$4.75 billion to Chesapeake Energy for its Fayetteville Shale assets. The transaction includes existing net production of approximately 415 million cubic feet of natural gas equivalent per day and midstream assets with approximately 420 miles of pipeline.

According to Evaluate Energy, the deals show there is “still an appetite for shale gas resources despite subdued gas prices,” but noted that deal volume was still dominated by the oilier plays like the Bakken Shale and Eagle Ford Shale. Over 40% of shale deals in the quarter were attributed to these two plays.

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