M&A Activity in 2011 Set New Records, including Utica Shale

Last year’s mergers and acquisitions activity in the oil and natural gas sector set new records, both in the total value of deals and the total number of deals. Although the Marcellus Shale was responsible for a great deal of M&A activity in 2010, for 2011, the Utica Shale, considered an emerging shale play, ranked higher than the Marcellus in M&A activity. For 2011, the Utica saw 12 deals worth a combined $5.3 billion.

PLS, Inc. reports that United States M&A activity for upstream oil and gas deals set records in 2011 for both deal values and deal counts. Totals for 2011 are $86 billion (versus prior 2010 record of $75 billion) in 369 deals (versus prior 2010 record of 313 deals). According to Ronyld W. Wise, President of Houston-based PLS, Inc., "Industry appetite for oil-rich resource plays, particularly the North Dakota Bakken shale, Texas Eagle Ford shale and Ohio Utica shale, drove deal activity in the unconventional sector to a record $62 billion. We expect continued strong activity in oil and liquids-rich resource plays in 2012." Already in 2012, Devon Energy has struck a $2.5 billion JV with China-based Sinopec across five new venture resource plays. Other large deals in the market include: 1) the E&P portfolio of El Paso Corporation, 2) EnerVest partnerships seeking another Utica shale JV partner or outright sale via a process anticipated in mid-2012 and, 3) Chesapeake working three JV deals (Williston basin, Mississippian and a third undisclosed area).

For the unconventional sector, six of the deals in 2011 make the Top 10 list for unconventional deals by value (see Table 2) since 2006. Australian-based BHP Billiton made two Top 10 acquisitions in 2011. In July, BHP acquired Petrohawk Energy for $15.1 billion with producing assets primarily in the Eagle Ford and Haynesville shales. Earlier in the year, in February, BHP acquired all of Chesapeake Energy’s interests in the Fayetteville shale play in central Arkansas for $4.8 billion.

In the largest corporate M&A deal of the year across all industries in the United States in 2011, Kinder Morgan acquired El Paso Corporation for $37.8 billion in October, creating North America’s largest midstream company. In its analysis, PLS allocated $7.2 billion for the upstream E&P portfolio of El Paso which ranks the upstream oil and gas portion of the deal as the third largest unconventional, upstream transaction since 2006.

Looking further into the unconventional sector by plays, the Bakken shale led deal activity striking 49 separate transactions (32% of all unconventional activity) totaling $7.2 billion, up from 17 deals (13%) for $4.6 billion in 2010. The Eagle Ford shale was the second leading area with 22 deals for $6.7 billion (vs. 30 deals for $9.5 billion in 2010). The emerging Utica shale accounted for 12 deals and $5.3 billion in 2011.*

*PLS/WSJ MarketWatch (Jan 13, 2012) – Record $86 Billion in 2011 U.S. Oil and Gas Upstream Deals