Global Q1 2018 Upstream M&A Totals $32 Billion, Highlighted by Permian Mega-Deal

NEW YORK–(BUSINESS WIRE)–Global upstream oil and gas M&A transactions totaled $32 billion in Q1
2018, supported by strong U.S. activity focused on the Permian Basin,
according to oil and gas information provider 1Derrick. Deal value in Q1
2018 was less than half the record-setting $63 billion in Q1 2017, but
on par with deal value run rate during in Q2-Q4 2017. U.S. deal value
rebounded from a weak $19 billion in second half 2017 to reach $22
billion. In contrast, International deal value excluding the United
States was just $10 billion for the quarter, down from $38 billion a
year ago.

“The highlight of the first quarter was Concho Resources’ $9.5 billion
purchase of fellow Permian producer RSP Permian, the largest U.S.
corporate deal since 2012 and the largest ever Permian transaction“,
said Mangesh Hirve, COO of 1Derrick. “After a three-quarter hiatus
following $39 billion in deals in Q3 2016 through Q1 2017, M&A activity
is once again heating up in Permian, the premier U.S. resource play.” He
added, “In contrast, international activity slowed down dramatically
across all regions, with no single deal exceeding $1 billion.”

The largest international transaction was Mubadala’s $934 million
purchase of a 10% interest in Egypt’s Zohr gas field from Eni. Notably,
Majors participated in seven of the top 20 transactions, with
divestitures by Shell in Thailand, New Zealand and Iraq accounting for
approximately $2 billion, or nearly 20% of the quarterly International
deal value. Total S.A. acquired an interest in the Waha concession in
Libya while selling small interests in Canada and Norway. The key driver
in the steep drop in international activity was lower Canadian oil sands
and North Sea deal flow, which plunged to $1.1 billion and $0.69 billion
in Q1 2018, respectively, after totaling $24.4 billion and $5.3 billion
in Q1 2017. “However,” Mangesh Hirve commented, “we expect international
M&A to rebound through 2018, driven by the $10-$11 billion in North Sea
assets and $6-$7 billion in Canadian oil sands assets that are currently
on the market.” Early in Q2, Linda Cook’s Harbour Energy, backed by EIG
Global Energy Partners, made a $13 billion bid to acquire Australia’s
Santos.

Three US transactions in Q1 2018 exceeded $1 billion, topped by the
blockbuster $9.5 billion Concho/RSP Permian deal. Special purpose
acquisition entity-TPG Pace Energy acquired EnerVest’s Eagle Ford assets
for $2.66 billion and private equity-funded Admiral Permian purchased
Delaware Basin acreage from Riverstone backed-Three Rivers Operating III
for an estimated $1.15 billion. Public companies accounted for 15
divestitures in the top 20 US deals, with private equity funded firms
acquiring 40% of these assets. Other buyers included two international
firms, with South Korea’s SK Innovation purchasing STACK assets for an
estimated $300 million and Australia-listed Sundance Energy spending
$222 million for Eagle Ford acreage. Overall, Permian deals dominated
the quarter, with 9 transactions accounting for nearly two-thirds of the
total top 20 value.

Concho’s purchase of RSP Permian to become the largest unconventional
oil and gas producer in the Permian Basin has spurred widespread
speculation that the massive deal will trigger a wave of corporate
consolidation in the region. 1Derrick’s Mangesh Hirve pointed out, “We
believe this is a landmark transaction, where RSP Permian’s acreage,
built up through multiple transactions since 2014, is contiguous to
Concho’s and will generate an estimated $2 billion net present value in
synergies. It is the search for these synergies that will drive further
consolidation in the play.”

Private Equity backed firms and publicly traded companies provide a
plethora of Permian consolidation opportunities. 1Derrick’s proprietary
Private Equity Database lists 130 firms operating in the Permian,
including 72 that have received a total of $13.2 billion in equity
commitments from the top eight investment firms. Even though oil prices
have stabilized in the $60 per barrel range in 2018, the S&P E&P index
has fallen nearly 20% from its December 2016 high. The lower equity
valuations provide opportunities for acquisitions among the more than 35
publicly-traded E&Ps which will produce 1 million boe or more in the
Permian in 2018.

1Derrick/Derrick Petroleum Services (www.1derrick.com)
is an independent oil and gas research firm with offices in Houston,
London, Singapore and Bangalore. For more information on its industry
leading databases and reports on M&A, business development strategy, new
ventures, and exploration, please contact Ajit Thomas at [email protected]
or 1.646.284.8661

Contacts

1Derrick
Ajit Thomas, 1.646.284.8661
[email protected]