The strong rally in commodity prices and the recovery in share prices in the second quarter of 2021 marked the return of many energy mergers and acquisitions in the U.S. upstream segment, with quarterly value sitting at its highest since the second quarter of 2019, energy data analytics company Enverus said on Monday.
Following a timid start to 2021 in the first quarter, the pace of U.S. oil and gas deals surged in the second quarter. More than 40 deals were announced between April and June, for a combined total value of $33 billion, Enverus said in a report.
“That is the highest quarterly value total since 2Q19, which included Occidental Petroleum’s historic buy of Anadarko Petroleum, and is tied for the most announced deals above $1 billion since 2014,” the energy data analytics firm said.
“Responding to investor pressure to operate more efficiently, E&P companies have prioritized consolidation,” Andrew Dittmar, senior M&A analyst at Enverus, said, commenting on the data.
“With three extremely active quarters out of the last four, there has been more than $85 billion announced in upstream M&A during the prior 12 months,” Dittmar noted.
Top of the list in the upstream M&A was the deal announced in May, in which Cabot Oil & Gas Corporation and Cimarex Energy announced an all-stock merger of equals that would result in a company with a total enterprise value of around $17 billion.
The second most valuable deal was Pioneer Natural Resources acquiring energy-independent DoublePoint Energy for a consideration of $6.4 billion, including the assumption of some $900 million in debt.
The M&A activity so far this year shows that there has been a shift in the targets of deals in the shale patch, the analytics firm says.
Last year, it was mostly public companies consolidating to achieve operational and administrative synergies. This year, the main driver of upstream M&A deals has been public companies acquiring private and private equity-sponsored producers.
“The deals targeting private E&Ps are less about cost-cutting synergies and more about adding inventory. That can be in a buyer’s home basin, like Pioneer/DoublePoint, or entering a new area as Southwestern did by acquiring Indigo in the Haynesville Shale,” Enverus’s Dittmar said.