Brazil: New regulations spur offshore investment surge

Brazil secured an encouraging US$3 billion in bonus bids during key licensing rounds held last fall, according to a new report, which represents 23% of the country’s total upstream deal values since 2014.

This fresh investment, notably in offshore pre-salt basins, follows the introduction of significant regulatory changes to the oil and gas sector within Brazil.

The report, entitled Latin America: Assessing The Impact Of Oil Prices, Energy Reforms And National Oil Companies On Deal Activity, is produced by the Daily Oil Bulletin, Evaluate Energy and Sproule. It assesses the impacts on deal-flow and itemizes the bonus bids made by several global oil and gas powerhouses. It also highlights the key upstream deals within the other US$9.9 billion in upstream deals agreed in Brazil between 2014-2017. With a total of US$12.9 billion, Brazil witnessed more M&A activity in terms of pure deal values than any other Latin American nation.

Source: Latin America: Assessing The Impact Of Oil Prices, Energy Reforms And National Oil Companies On Deal Activity.

“Recent bid rounds have been dominated by large, multinational independents and national oil companies attracted to prolific deepwater targets,” said Jim Chisholm, report co-author and Vice President, Latin America, at Sproule. “As the political situation and Petrobras stabilize, Brazil should be well placed to attract significant investment, both in its prolific offshore basins and resource-rich but relatively untapped onshore basins.”

The full report, which includes analysis of M&A trends in Brazil, Mexico, Argentina and Colombia, is available for download here.

Global upstream M&A reaches $163 billion in 2017

In a relatively stable year for the oil and gas industry, overall M&A spend – based on deals announced – in the upstream sector reached $163 billion during 2017, according to a new report released today by Evaluate Energy.

The full report is available for download here and provides insight and analysis on all the key deals of the year around the world.

This total of $163 billion in new upstream sector deals is 17% higher than the $139 billion reached during 2016 and is also the highest annual outlay since 2014, the year the oil price first dropped in this current cycle.

Source: Evaluate Energy M&A Review for 2017

Deal counts were also up, year-over-year.

“Upstream deal values were high in 2017 compared to recent years, but the data also shows a real increase in underlying activity this year. The number of what we refer to as ‘significant’ deals – those with a value of over $10 million – was up by 10% from 2016,” said Eoin Coyne, lead author of the new report in his role as Senior M&A Analyst at Evaluate Energy.

The oil price has been the key driver behind this increased activity in what has been the strongest year for the average price since 2014. In 2017, the WTI price averaged $50.80, which is 17% higher than the 2016 average of $43.29.

The outlook for activity in the coming year is equally bright. “The WTI price hasn’t closed below $50 for more than three months and is currently trading in excess of $60, which all bodes well for market stability,” added Coyne. “Also, OPEC has extended its support for the oil price by extending its production cut to the end of 2018.”

For more on all the key deal trends in the upstream sector in 2017, download the full report here. The report includes detailed overviews of the largest deals in North America, Europe and Latin America.

Robust deal making in Latin America bucks global trend

Upstream M&A activity in Latin America has been able to largely withstand falling oil prices that stalled deal flow in many regions of the world, with deal counts largely unaffected.

That is one of the key findings of a new report on Latin America released this week by the Daily Oil Bulletin, Evaluate Energy and Sproule.

Source: Latin America: Assessing The Impact Of Oil Prices, Energy Reforms And National Oil Companies On Deal Activity.

“While motivations for various deals changed and individual deal values may have dropped in light of the price downturn, the number of deals agreed over time shows little to no correlation with the falling oil price,” said Darrell Stonehouse, report co-author and DOB’s special projects editor. “In fact, looking at deal counts alone, it would be near impossible to pinpoint when the price downturn actually took place.”

The report, entitled Latin America: Assessing The Impact Of Oil Prices, Energy Reforms And National Oil Companies On Deal Activity, includes analysis of Brazil, Mexico, Argentina and Colombia. It is available for download here.

Latin America is one of the world’s fastest growing upstream environments. With major producing countries in the region racing to attract investment, the deal counts illustrate that even in the toughest of investment environments there is a willingness to deal.

Added Stonehouse: “This attraction to Latin American upstream assets, together with strategic energy reforms being implemented by Latin American governments, should mean that deals for Latin America’s upstream assets would continue to generate headlines in the near future.”

November saw C$976 million in new Canadian upstream deals

Canada saw less than C$1 billion in new upstream M&A activity for the first time in three months according to the latest M&A review from CanOils. November’s total of C$976 million represents a significant fall of 46 per cent and 39 per cent, respectively, from totals witnessed in September and October.

Source: CanOils M&A Review, November 2017

The single largest deal in November was another asset sale by Cenovus Energy. The company agreed to sell its Weyburn unit in Saskatchewan to Whitecap Resources, in so doing reaching a major debt milestone related to its C$17.7 billion acquisition from ConocoPhillips.

This month also saw Pengrowth Energy continue its asset sales program in Alberta, completing a C$150 million deal in Swan Hills and agreeing another minor deal in Quirk Creek. The company will focus its efforts on two assets going forward – thermal oil production at Lindbergh and Montney gas at Groundbirch.

November saw almost 28,000 boe/d put up for sale in new public asset listings. Full analysis on all deals and asset listings in November are available in the CanOils report, which can be downloaded here.

Cenovus dominates another month of Canadian M&A in 2017

According to new data in CanOils’ latest M&A review for October 2017, M&A deals involving Cenovus Energy Inc. as either the acquirer or selling party have accounted for half of all upstream deal activity in Canada between January and October.

The company has dominated the M&A landscape in Canada this year and October was no different. The new CanOils report – available to download here – analyses every Canadian upstream deal in October and focuses on Cenovus’s sale of its Palliser area assets to Torxen Energy and Schlumberger. At C$1.3 billion, this deal accounted for 81 per cent of the total C$1.6 billion M&A spend in the Canadian upstream sector in October.

In total, Cenovus has now been involved, as either the acquirer or selling party, in around C$20.5 billion of Canadian upstream deals this year up to the end of October. That equates to half of the entire upstream M&A spend in Canada in the same timeframe.

If we exclude deals in the Canadian oilsands sector, non-oilsands deals involving Cenovus in either a buying or selling capacity make up 32 per cent of non-oilsands deals in Canada, again, up to the end of October.

By the end of November, these percentages will undoubtedly increase, given the company’s most recent agreement with Whitecap Resources to part with its Weyburn unit in Saskatchewan for C$940 million.

Away from Cenovus, October did see a number of other significant deals complete. Hong Kong’s MIE Holdings Corp. completed its acquisition of the CQ Energy Canada Partnership for C$722 million; RMP Energy Inc. completed the sale of a large portion of its producing asset base on its way to becoming Iron Bridge Resources Inc. in the near future; and Crescent Point Energy revealed a set of noncore asset sales for a combined C$190 million in its third quarter results release. Over 14,500 boe/d was also put up for sale in public asset listings.

For full details and in-depth analysis, download the CanOils October M&A Review here

Global upstream M&A hits $41.7 billion in Q3 2017

Evaluate Energy’s latest M&A report shows that the third quarter witnessed $41.7 billion of new upstream oil and gas M&A deals. This is a 50% increase in total spending compared to Q2 2017 and it is also just above the average quarterly spend of $39.8 billion since the oil price downturn began in late 2014. Download the full report here.

The largest deals this quarter included, among others:

  • Russia’s Rosneft, which saw a significant change in its ownership structure for the second time in twelve months
  • France’s Total, which agreed a deal with Denmark’s Maersk that will see the Danish company exit the E&P sector entirely
  • Canada’s Cenovus Energy, which continued its plan to balance the books after its huge oilsands acquisition in Q1 by agreeing two major sales in September

Meanwhile, in the U.S., the Permian Basin still dominates U.S. activity in 2017 despite a second consecutive quiet quarter of deals, in which the STACK formation and Williston Basin saw the country’s biggest deals.

For analysis on all the major deals this quarter, download the Evaluate Energy Q3 2017 upstream M&A review here.

UK oil and gas deals around US$6bn in H1 2017

Around US$6 billion in M&A activity involving UK oil and gas companies has taken place during the first half of 2017 – with more activity predicted for the remainder of the year and into 2018.

Total’s recent deal to acquire Maersk Oil & Gas A/S heads the list of deals involving North Sea assets this year, according to Evaluate Energy M&A data.

Source: Evaluate Energy M&A Database

Assets changing hands and the increasing diversity in their ownership suggests that the UK Continental Shelf may start to benefit from a badly needed investment boost, according to the findings of an annual economic report authored by Oil & Gas UK.

“There are still serious issues facing our industry which has suffered heavy job losses since the oil price slump,” said Deirdre Michie, CEO of Oil & Gas UK. “But we are hopeful that the tide is turning and expect employment levels to stabilise if activity picks up.”

The report says low levels of exploration and appraisal activity remain a serious concern with drilling at record lows. Oil & Gas UK said the basin needs further capital investment, as only three new field approvals have been sanctioned since the start of 2016.

Additional report findings:

  • The cost of lifting oil from the North Sea has almost halved since 2014 – this improvement to unit operating cost is greater than improvements achieved by any other basin
  • Production has increased by 16% since 2014 – driven by production efficiency improvements, brownfield investment and new field start-ups
  • Changes to the tax regime have helped create one of the most competitive fiscal regimes for upstream investment globally

Click here to learn more about EE’s database of M&A deals.

Canada: Top 10 non-oilsands E&P deals of 2017 so far

The major Cdn$32.1 billion in oilsands mining deals that were announced in March dominated Canadian M&A activity during the first seven months of 2017, as they comprised 87% of the overall value of transactions. But it’s important we don’t allow this to skew the significance of other deals agreed and completed this year.

Source: CanOils M&A Database

New analysis in CanOils’ latest M&A report illustrates that upstream activity picked up in terms of overall deal values throughout Q2, but the actual number of deals dropped off in June. After the second quarter ended, even though the number of new deals stayed flat, July saw three of Canada’s largest deals outside of the oilsands sector to boost deal totals.

Below are the top 10 upstream deals in Canada this year so far, away from the four huge deals in the oilsands mining sector, according to CanOils M&A data.

For more on each individual deal, download the relevant monthly M&A review at the link provided.

1) Cdn$852 million – Paramount Resources acquires 85% stake in Trilogy

The company to agree the largest single sale of 2016 has also agreed the largest non-oilsands acquisition of 2017 so far. Paramount Resources Ltd. (TSX:POU), a company that made headlines with its Cdn$1.9 billion sale of western Canadian assets to Seven Generations Energy Ltd. (TSX:VII) last year, agreed a deal for over Cdn$850 billion for the 85% stake in Trilogy Energy Corp. (TSX:TET) it did not already own. The deal will see Paramount issue Trilogy shareholders with around Cdn$455 million in Paramount stock, while the rest of the consideration is made up of Trilogy debt to be assumed, according to Trilogy’s balance sheet in Q2 2017.

For more on the largest non-oilsands deal of 2017 so far, download the NEW CanOils M&A Review for July 2017.

2) Cdn$722 million – Centrica and Qatar Petroleum exit Canada

This deal was a completely international affair, with the UK’s Centrica Plc (LSE:CNA) and Qatar Petroleum deciding to sell their respective 60% and 40% interests in the CQ Energy Canada Partnership to a consortium led by Chinese-backed MIE Holdings Corp. The deal will see the selling parties receive a share of Cdn$722 million proportionate to their ownership stake in the partnership. Centrica, having sold its interests in Trinidad and Tobago in a US$30 million deal to Royal Dutch Shell (LSE:RDSA), has now switched its E&P focus entirely to Europe, and this week signed a new joint venture agreement with Bayerngas Norge.

For more on the sale of the CQ Energy Canada Partnership, download the CanOils M&A Review for June 2017.

3) Cdn$467 million – Waterous becomes Northern Blizzard’s majority stakeholder

The largest deal to involve a Canadian-headquartered company outside of the oilsands sector this year so far saw Waterous Energy Fund become the largest single stakeholder in Northern Blizzard Resources Inc. (TSX:NBZ). Since this deal completed in May, Northern Blizzard has changed its name to Cona Resources Ltd. and is now listed under the ticker “CONA” on the TSX. Waterous acquired its 67% majority stake for Cdn$244 million in cash and Northern Blizzard’s net debt position was Cdn$223 million in Q1 2017, net to this 67% stake. The company produced just over 11,500 boe/d net to Waterous’ position in Q1, representing a cost of Cdn$40,400 per flowing barrel.

For more detail on this deal, download our M&A reports for April and May 2017.

4) Cdn$460 million – Paramount acquires Apache’s remaining Canadian assets

Paramount’s other huge deal this year was unveiled in the same press announcement as the Trilogy purchase. Paramount will be acquiring the remaining Canadian assets held by Apache Corp. (NYSE:APA) for Cdn$460 million. Unlike the Trilogy deal, no debt will be assumed and Paramount will fulfil the consideration using cash on hand rather than issuing stock.

For more on Paramount’s acquisition of Apache’s assets, download our M&A report for July 2017

=5) Cdn$300 million – Cardinal acquires light oil assets from Apache

Before the larger deal with Paramount was agreed, Apache had already agreed a Cdn$300 million deal with Cardinal Energy Ltd. (TSX:CJ) to sell light oil assets in the Weyburn/Midale area of southeast Saskatchewan and the House Mountain area of Alberta. This deal saw Cardinal’s production boosted by 5,000 boe/d, while light oil now makes up a much larger proportion of the company’s portfolio at 45% compared to medium oil output.

For more on this deal, download the CanOils M&A Review for June 2017.

=5) Cdn$300 million – Pengrowth sells Olds/Garrington area assets in Central Alberta

Pengrowth Energy Corp. (TSX:PGF) has been arguably the busiest seller during the first two quarters. Its Cdn$300 million deal in early July is the largest and most recent of the company’s divestitures so far in 2017 and reduces Pengrowth’s predicted 2017 production by just under 14,000 boe/d at a cost of Cdn$21,600 per flowing barrel.

For more on Pengrowth’s 2017 divestitures and its success in strengthening its balance sheet, download our M&A report for July 2017

7) Cdn$294 million – Painted Pony acquires UGR Blair Creek

Painted Pony Petroleum Ltd. (TSX:PPY) completed its acquisition of UGR Blair Creek Ltd. in May from Unconventional Resources Canada LP (“URC”). The deal consideration of Cdn$294 million included Cdn$48 million in net debt assumption and was otherwise satisfied via the issuance of 41 million new Painted Pony shares to URC. Painted Pony now anticipates its 2017 annual average daily production to increase by 12% and also expects to exit 2017 with production of over 73,000 boe/d.

For more on this deal, download our M&A review for March and May 2017.

8) Cdn$201 million – Twin Butte asset sales cleared in court

The only deal in this list to be announced in the relatively barren first two months of 2017. At the time, the consideration was unknown, but in March, it was confirmed that the company now known as West Lake Energy Ltd. had acquired the assets of the insolvent Twin Butte Energy Ltd. for around Cdn$201 million. Before being forced into receivership by its banking syndicate last September, Twin Butte had medium and heavy oil production of approximately 12,700 boe/d in east-central Alberta and southwestern Saskatchewan.

For more details on this deal (before a consideration was confirmed), download our January 2017 M&A review.

9) Cdn$185 million – Pengrowth sells assets in the Swan Hills area of Alberta

This was actually the second deal that Pengrowth Energy agreed in the Swan Hills area of north central Alberta this year, but the first of those deals has since been cancelled due to issues faced by the acquiring party in securing finance. This second deal, originally announced in April, saw Pengrowth part with 5,150 boe/d of oil-weighted production at a cost per flowing barrel of just under Cdn$36,000. In July, Pengrowth stated that it had agreed deals that helped the company reduce its net debt position by 66% and only saw proved and probable reserves decrease by 16%.

For more on this deal in Swan Hills, download our April 2017 M&A review.

10) Cdn$150 million – Paramount sells assets in Valhalla, Alberta

Paramount preceded its two huge July acquisitions by making a Cdn$150 million asset sale in the Valhalla area of Alberta in May. The buyer was not named and Paramount did not divulge a specific rationale for the agreement. The divested assets comprise of 74 net sections of land and produced 1,400 boe/d in Q1 2017, representing a cost of over Cdn$100,000 per boe to the acquirer.

For more on this deal, download our May 2017 M&A review.

Permian Basin takes backseat as Marcellus sees largest deal of Q2 2017

The Marcellus shale stepped out of the huge shadow cast by the Permian Basin and recorded the largest single upstream M&A deal of Q2 2017, according to new analysis in Evaluate Energy’s Q2 2017 Upstream Deals review, which can be downloaded here.

The deal will see EQT Corp. (NYSE:EQT) acquire Rice Energy Inc. (NYSE:RICE) for US$8.2 billion, comprised of stock, cash and the assumption of US$1.5 billion in debt. The Marcellus also saw another significant deal in Q2, whereby Noble Energy Inc. (NYSE:NBL) agreed to sell its position in the play for just over US$1 billion. In total, deals involving Marcellus assets totalled US$9.4 billion in Q2 2017; the highest ever quarterly M&A spend in the play.

The largest single deal in the Permian this quarter was just over US$600 million. In total, the basin completely bucked recent trends with just US$2.4 billion in new deals – its lowest total since Q1 2016.

Throughout the oil price downturn and the rest of 2016, the Permian Basin has been the hotbed of upstream M&A activity, not just in the United States, but worldwide. The Permian, with its strong economic rationale, profile and drilling activity levels, has seen deals totalling over US$61 billion since the end of 2014, representing 15% of the global upstream total. Furthermore, Q1 2017 saw the largest single quarterly outlay that the basin has ever seen at US$19.6 billion.

That’s not to say the Marcellus didn’t have any activity throughout 2016. In fact, as we wrote a few months ago, 2016 saw a resurgence in demand for asset packages in the gigantic gas play in the Appalachian basin. But over the past year and up until Q2, M&A has clearly been dominated by the Permian.

Source: Evaluate Energy M&A Review, Q2 2017 – Download here

This quarter also saw U.S. assets change hands in the San Juan and Piceance basins, with ConocoPhillips (NYSE:COP) and Encana Corp. (TSX:ECA) trimming non-core operations. Outside of the U.S., last quarter’s major deals in the Canadian oilsands completed while two major European utilities in France’s ENGIE and Denmark’s DONG Energy agreed deals to sell most or all of their E&P business segments. DONG is exiting the sector completely, while ENGIE will be retaining a minority stake in a large Algerian gas field.

For more on all of these stories and detailed single deal analysis, download the Evaluate Energy Q2 2017 M&A review here.

EIA: Reporting U.S. companies see oil reserves decline for second consecutive year

Proved oil and liquids reserves for 67 U.S.-listed companies fell for the second year in a row in 2016, according to fresh analysis from the U.S. Energy Information Administration (EIA) using Evaluate Energy data.

The EIA’s analysis, which can be viewed in full at this link, concludes that the decline was primarily due to a handful of larger companies recording a significant drop in Canadian oilsands reserves.

Other causes listed by the EIA include high production levels, downward revisions of existing resources and relatively low levels of extensions and discoveries.

The full article, which also includes analysis on these 67 companies’ production portfolios, is available at this link.

EIA has also released its annual financial review for global oil and gas in 2016, which can be downloaded here. This report is also based entirely on oil and gas company data provided by Evaluate Energy.