Interest In Shale Gas Leads To Major M&A Activity

According to a recent PwC analysis of energy mergers and acquisitions (M&A) activity, the total value of U.S. oil and gas M&A increased substantially in 2011, due largely to deals in the shale-gas space.

‘M&A activity in the U.S. oil and gas sector was extremely active in 2011, as shale plays continued to attract the large multinational energy companies, foreign buyers and private equity firms,’ says Rick Roberge, principal in PwC's energy M&A practice.

‘New drilling techniques in hydraulic fracturing are uncovering vast amounts of crude oil and natural gas in a very accessible environment to oil and gas reserves, and this is what is contributing to the huge interest,’ he adds.

According to PwC, there were 17 shale-related deals in the fourth quarter of 2011 with a total deal value of $57 billion, compared to 32 deals representing $29.3 billion during the final three months of 2010. Average deal value in the fourth quarter increased 209% to $3.4 billion.

In the fourth quarter, there were four transactions involving the Marcellus Shale totaling $3.5 billion and three Utica Shale deals with a total value of $3.6 billion. For full-year 2011, there were a total of 13 deals in the Marcellus Shale worth $9.9 billion, compared to 22 deals that totaled $20.3 billion during 2010. The Utica Shale had seven transactions that represented $6.7 billion in 2011 – a jump from one deal in all of 2010, with a value of $178 million.

‘We expect deal flow to remain active in 2012, despite continuing economic uncertainty, due to attractive commodity prices – which promotes exploration and development, as well as upstream M&A activity,’ Roberge notes. ‘Companies are now focused on building the related infrastructure to transport the extracted oil and gas, which we believe will likely be a key driver of M&A activity in 2012.’

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