Finbrook Releases Global Upstream Oil & Gas M&A Review for Q2-2020

By Malavika Sharma
July 06, 2020
2 minutes read
Offshore Rig

Finbrook has released its Q2-2020 Global Upstream Oil & Gas M&A Review summary report, that shows worldwide deal activity fell by around 86% relative to the 3-year average for the second quarter due to the Covid-19 pandemic and resulting oil price slump during the period.

Finbrook’s outlook for H2-2020 anticipates a sharp jump in distressed asset sales and consolidation across the small & mid-cap E&P space globally, even as oil prices have recovered to over US$40 per barrel, relieving some of the financial strain on the upstream sector.

In the United States, upstream M&A deal value for the second quarter of 2020 fell by 82% as compared with a three-year average for the same period, while deal value for the rest of the world fell by 90%. Total Q2 deal value in the U.S. amounted to just ~US$2.4 billion, compared with an average of ~US$12.9 billion in the second quarter for the last three years (adjusted for the Occidental – Anadarko deal reported in Q2-2019). U.S. deals during the quarter were driven by four significant Appalachian deals that accounted for ~US$1.2 billion in transacted value, or over half of the reported total deal value for the period.

Internationally, deal value across seven key regions this past quarter fell to ~US$1.3 billion against a three-year average of ~US$14 billion, although deal flow gathered pace in late June as oil prices recovered and stabilized around US$40 per barrel. Several major deals that had been previously announced were also renegotiated during the second quarter, including Premier Oil’s acquisition of UK North Sea assets from BP, HitecVision-backed NEO E&P’s acquisition of TOTAL’s UK North Sea assets, and Energean’s acquisition of Edison’s E&P assets globally announced last year.

Top U.S. deals in Q2 included:

  • Pure Acquisition and HighPeak Energy Partners announced a revised business combination agreement, forming HighPeak Energy Inc. with a pro forma enterprise value of ~US$845 million.
  • National Fuel Gas acquired upstream + midstream assets in Pennsylvania from Shell for US$541 million.
  • Sixth Street Partners acquired ORRIs across Antero’s Appalachian asset base for US$402 million.

Significant international deals included:

  • TOTAL signed a new agreement to acquire Tullow’s interest in the Lake Albert project in Uganda for US$575 million, a deal originally announced in 2017 that ran into a major tax dispute with authorities.
  • Equinor’s divested its remaining ~4.9% minority stake in Lundin Energy for US$334 million.
  • Delek sold its rights to royalties in the Karish and Tanin Fields to the Noy Fund for ~US$90 million.

As the upstream industry braces for further bankruptcy filings, the U.S. deal pipeline for the remainder of 2020 will be driven by asset sales as companies deleverage their balance sheets, and by regional consolidation amongst higher-cost operators struggling to break even at US$40 oil. International deals will also be spurred by the need for consolidation amongst junior E&P companies as they seek farm-in partners and new sources of capital for commercially challenging projects.

To download a copy of the summary report, please click here

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