By: Mark Passwaters – Upstream Online – US oil and gas merger and acquisition activity declined in the second quarter, according to Enverus Intelligence Research.
The oil & gas sector research firm said on Thursday that second quarter 2022 M&A activity in the second quarter totaled $12 billion, compared to $14.7 billion in the first quarter of the year and $34.8 billion in the second quarter of last year.
“The spike in oil prices that followed Russia’s invasion of Ukraine temporarily stalled M&A as buyers and sellers disagreed on the value of assets,” said Andrew Dittmar, director at Enverus Intelligence Research.
The Permian basin remained the primary source of oil and gas M&A activity during the second quarter, with 46%, or $5.5 billion, of transactions, occurring.
Multi-region deals constituted another 27%, or $3.2 billion. For the second time in three quarters, there were no oil and gas deals recorded in the US Gulf of Mexico.
About one-third of the total oil deal value in the second quarter came in one deal, between public company Centennial Resource Development merging with privately-held Permian operator Colgate Energy Partners III.
Dittmar said the current environment, where oil and gas producers are often viewed negatively in the world of public equity markets, makes it more difficult for privately-held companies to launch an initial public offering. That leaves M&A as the main exit route, he affirmed.
Noting the recent spree in public companies snapping up private ones, Dittmar said many private equity firms will continue to look for buyers in the Permian basin and other major oil shale plays in the US.
“The challenge is finding buyers willing to pay their asking prices. Public E&Ps remain chiefly concerned with getting capital back to shareholders and being too aggressive on M&A can smack of growth investors don’t want,” he said.