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A Houston based research, transaction and advisory firm, PLS in conjunction with its international partner Derrick Petroleum Services, has put the global upstream oil and gas Mergers and Acquisition (M&A) activity for third of 2013 at $41.8 billion in 150 separate transactions.

This, it said, represents 59 per cent increase from the second quarter, which was $26.4 billion in 168 deals.

PLS Managing Director, Brian Lidsky stated, “this year, the oil and gas deal market started slow after an unusually busy fourth quarter of 2012, which saw 238 deals for $138 billion.

“However, both the pace and dollar amount of deals has consistently increased throughout this year culminating in a third quarter total of $42 billion in 150 deals — a level of activity on par with quarterly averages since 2007.

“Furthermore, looking forward we expect the final quarter of 2013 to trend above average for deal activity,” he added.

The report noted that driving heightened activity in third quarter were several factors including a high deal inventory level along with a healthy level of buying interest from NOCs and private equity.

“Looking at sellers, there is motivation to divest conventional legacy producing assets, as well as, sell down interest in large world-class global discoveries. The capital raised from these transactions will be used to help fund increasing capital plans including, but not limited to, North America’s resource plays.

“A stark example of this trend in third quarter was Apache Corporation’s sale of $7.2 billion of assets through a series of rapid transactions, which far surpassed its initial goal of $4 billion. Apache will use the proceeds to repay debt, buy back shares and accelerate resource play development, primarily in the U.S where it is enjoying rapidly growing production in the Permian and Mid-Continent regions.

“First, Apache sold its legacy Gulf of Mexico shelf portfolio to Fieldwood Energy LLC, backed by PE firm Riverstone, for $3.75 billion in mid-July. Next, in mid-August, Ember Resources bought a conventional package in Canada from Apache for $214 million. Two weeks later Apache sold one-third of its Egyptian holdings to Sinopec for $3.1 billion. And finally, in mid-September, Apache sold another two Canadian conventional deals for $112 million,” it said.

Regionally, North America’s $15.9 billion in oil and gas M&A activity continued to lead the global M&A market with a 38 per cent share, albeit down from 42 per cent in second quarter and down from an average 56 per cent share since 2007.

According to the report, Africa remains a bright spot with a 16 per cent share of global value. “Prior to 2013, Africa captured just six per cent of global deal value. South America is also running strong with an 11 per cent share compared to five per cent historically. In the FSU, deal value surged to $11.6 billion and the region captured a 28 per cent share.

Lidsky said that the biggest U.S. deal this quarter was the $3.75 billion sale of Apache’s Gulf of Mexico shelf assets to Fieldwood Energy.

“This deal is noteworthy on several fronts. First it immediately vaults Fieldwood into operating the largest GOM shelf asset base with current production of 95,000 boepd. Second, the transaction amplifies the role of private equity in today’s markets. Fieldwood is backed by PE firm Riverstone and according to Fieldwood, the deal represents Riverstone’s largest single investment. Lastly, the deal represents a noteworthy change for Apache, which, over a span of 30 years, had operated in the Gulf of Mexico shelf to build the company into where it is today. Now Apache’s growth is in large part coming from U.S onshore resource plays. This is a trend in the U.S markets, which is not unique to Apache,” it said.

 

Information from The Guardian was used in this report.

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