Oil & Gas News

Shale basin M&A activity surpasses seen-year high

mergers, Shale

By: Brandon Evans – Nathan Hasbrook – S&P Global Platts – Merger and acquisition activity among US shale operators surpassed a seven-year high this month as companies consolidate acreage in prolific southern basins.

2021 has had an unprecedented level of merger and acquisition activity, which now stands at $53.9 billion year to date, marking the highest level of activity since 2014, according to S&P Global Platts Analytics. In all of 2014, the busiest year on record, merger and acquisition activity totaled $53.5 billion.

In 2014, Henry Hub spot gas averaged $4.37/MMBtu, the highest annual average since 2010. Henry Hub spot gas year to date in 2021 has averaged $3.85/MMBtu, which is the strongest average since 2014.

While it is no surprise the Permian Basin accounts for the bulk of all transactions at 60%, the Haynesville has had an unusually active year. The Haynesville Shale has had $6.75 billion in activity, making up 13% of all deals year to date, making it the second most active basin.

Southwestern Energy entered the Haynesville Shale earlier this year, with the purchase of Indigo Natural Resources for $2.7 billion. However, their newest acquisition of GEP Haynesville for $1.85 billion, will make them the largest Haynesville operator in the country. The deal will comprise $1.33 billion in cash and the remaining $525 million will come from an estimated 99 million shares of common stock.

The Haynesville provides close to access to rising areas of demand, such as LNG feedgas, exports to Mexico, industrial and gas-fired generation.

“The transaction adds significant high-return locations to our development inventory while expanding access to premium Gulf Coast markets,” said Bill Way, Southwestern Energy’s CEO. “the financing and hedging strategy for the deal aligns with our commitment to financial strength and disciplined enterprise risk management.”

M&A activity has also continued into the fourth quarter in the Permian Basin.

With Colgate Energy’s purchase of another small acreage block in the Delaware Basin, 22,000 net acres for $190 million, the company now has over 100,000 net acres within the basin. Their primary acreage blocks lie in Reeves, Ward and Eddy Counties, and are expected to produce around 62,000 Boe/d.

Another southern US Basin, the Eagle Ford in South Texas, has also seen additional activity in the fourth quarter. It has accounted for about 10% of US shale M&A activity in 2021, making it the third most active basin behind the Permian and Haynesville.

Indian major Reliance Industries entered into an agreement this month with Ensign Operating to sell their Eagle Ford acreage, which is its last remaining US Shale asset. The deal includes 62,000 net acres with current production of 18,000 boe/d. While the total sale price was not disclosed, Platts Analytics estimates based on recent deal metrics within the Eagle Ford Shale that the total price was around $1.1 billion.

The first quarter of 2021 had minimal merger and acquisition activity, but the second quarter was busy with just under $29 billion in transactions, making up 46% of the total activity this year.

While M&A activity has surpassed a seven-year high in 2021, bankruptcies among upstream operators is at its lowest level since at least 2015, according to Haynes and Boone. Throughout the first half of 2021, only 12 producers filed for bankruptcy, the lowest number since 2015, when 13 companies filed.

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