M&A activity reaches highest first quarter volume in a decade: PwC

The U.S. oil and gas industry saw a record high volume of first quarter mergers and acquisitions — the highest its been in more than a decade. The M&A deals were driven by more activity in the drilling sector and interest in oil and gas assets by foreign players, according to a report from PricewaterhouseCoopers US.

While the Marcellus and Utica shale plays only saw two deals during the first quarter, the Utica deal represented the second largest in value in the first quarter at $924 million, according to PwC US.

Overall, for the three-month period ending March 31, there were a total of 43 oil and gas deals with values greater than $50 million accounting for $19.8 billion. That's an increase from 41 in the first quarter of 2013, according to PwC.

While the number of deals is up, the value of those deals is down compared to the fourth quarter of 2013 "due to companies selling off smaller non-core assets, a trend that PwC expects to continue through 2014," the firm noted in its quarterly report.

The Utica saw the second largest deal when Hess Corp., headquartered in New York, sold about 74,000 acres of its dry gas acreage in January for $924 million.

The Marcellus, the shale formation above the Utica, saw one deal worth $110 million. In February, Canonsburg-based Rice Energy Inc bought gathering pipeline assets in Washington and Greene counties from M3 Appalachia Gathering for $110 million.

The total number of Marcellus deals is down compared to fourth quarter 2013. PwC data indicates that period saw four deals valued at a total of $1.1 billion.

According to PwC, a total of 17 deals with values greater than $50 million related to shale plays came during the first quarter, totaling $6.2 billion, or 31 percent of total deal value.

“First quarter shale deal activity was on par with what we anticipated as we see the continued shift towards unconventionals,” said John Brady, a Houston, Texas-based partner with PwC’s energy practice. Unconventionals refers to hydraulic fracturing and horizontal drilling.

“A third of total deal value was related to shale plays in the first three months of the year, indicating the ongoing attractiveness of capitalizing on the long-term prospects for shale gas,” Mr. Brady said. “Unconventionals will continue to play a large part in deal activity going forward, as will finding opportunities for reducing cycle times and increasing productivity through new technologies and processes to increase speed and efficiency.”

Overall, the most active shale plays for M&A with values greater than $50 million during the first quarter of 2014 include the Eagle Ford in Texas, which had five deals with a total value of $3 billion, followed by the Bakken in North Dakota and the Permian in Texas with three deals each, representing $863 million and $276 million, respectively.

Stephanie Ritenbaugh: sritenbaugh@post-gazette.com, 412-263-4910

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