According to Drillinginfo, US oil and gas mergers in the third quarter of this year jumped by 250 per cent over the second quarter of 2018, breaking all quarterly records dating back to the fourth quarter of 2012.  Equinor photo.

US oil and gas mergers valued at $32 billion in the third quarter 2018

Drillinginfo reports that US oil and gas mergers and acquisitions (M&A) activity in the third quarter of this year surged 250 per cent over the second quarter 2018, and broke all quarterly records dating back to the fourth quarter of 2012.

The final dollar value for US oil and gas mergers and acquisitions for the third quarter is $32 billion, up from $9.1 billion in the second quarter.  Many of these moves were completed in US shale basins.

Drillinginfo Senior Director Brian Lidsky says shale basin consolidation will continue as private equity and private companies use risk dollars to “fringe areas and benches within established resource plays plus advancing today’s technology to new areas like the Powder River Basin as well providing inventory as they move to divest mode”.

In a soon-to-be-released report, findings from the data analytics company show $32 billion in activity during the third quarter of 2018 which is 76 per cent above the quarterly average of $18.3 billion dating back to 2009.

The highlight of the quarter was BP’s $10.5 billion strike to buy a portion of BHP’s US onshore portfolio, which includes activity in the Permian, Eagle Ford and Haynesville basins.  This is the single largest asset level purchase on record.

Drillinginfo says the purchase marks BP’s return to offence with its largest upstream buy since buying ARCO for $28 billion in April 1999.

BP reportedly beat out Shell for this asset package – a dynamic that solidifies the importance of the US shales as a key portfolio element for global majors.

Also during the third quarter, Permian-focused Diamondback Energy acquired fellow-Permian producer Energen Resources for $9.2 billion – a number just shy of the Permian record $9.5 billion paid by Concho Resources for RSP Permian during Q1 2018.

“We expect US M&A activity to continue at a heightened level,” said Lidsky.  “The industry is regularly reporting record well results across the US shales as it continues to de-risk acreage positions and advance technology,” he said.

Value ($billion) by Top Plays

Note: Included in Multiple/Other Play for Q3 is BP’s $10.5 billion buy from BHP which Drillinginfo allocates as follows: Permian $3.9 billion, Eagle Ford $4.8 billion, Haynesville $1.8 billion.

As well, an early September land auction in the New Mexico portion of the northern Delaware Basin breaks all BLM land sale records at $972 million with record high bids reaching $95,001 per acre.

Globally, Q3 2018’s $156 billion in energy transactions across the value chain (Upstream, Midstream, Downstream, OFS, Power, Utilities, LNG) compares to $161 billion in Q2 2018.

Moving forward, Drillinginfo says it expects the high pace of mergers and acquisitions to continue for the next six to 12 months.  Permian takeaway constraints will also present strategic opportunities over the next 18 months.

The company argues that the energy sector of the S&P 500 remains under-represented from a historical viewpoint and upside exists driven by higher oil prices as well an inflation hedge.