Oil & Gas 2010 Deal Trends - M&A Values Rise and China makes a bid for America

Tuesday, Jan 04 2011 by
Oil  Gas 2010 Deal Trends  MA Values Rise and China makes a bid for America

Oil and gas deals in the E&P sector reached $73 billion in the 4th quarter of 2010 with deals for the year totalling $238 billion, compared with $151 billion in 2009.

The total deal value in the last quarter of this year is second only to Q3 2010 in recent years, even outscoring Q4 2009 - a quarter that included ExxonMobil’s $41 billion acquisition of XTO Energy. That’s according to an analysis of Evaluate Energy’s in-depth M&A database.

At least four key trends emerge from the pattern of oil and gas deals in 2010:


  • A marked shift in Chinese activity away from Africa towards the Americas.
  • A growing interest in shale plays containing liquids and some interesting new innovative approaches to monetising shale resources, prompted by the widening gap between gas and oil prices.
  • A trend towards taking companies private
  • The nearing completion of a dramatic series of divestitures by BP

China Shifts Acquisition Focus to the Americas

Following a quarter of inactivity in Q3 2010, Chinese state companies satisfied their appetite for foreign assets with a flurry of deals in Q4 2010, ending the year with a total of $31 billion in E&P acquisitions. This compares with a total of $19 billion spent by Chinese companies on E&P assets in 2009. In this time the Chinese government has been agnostic towards the location of their acquisitions, with major deals being conducted across 14 different countries. Whilst Africa was the main focus of acquisitions in 2009, Canada and South America dominated China’s deals in 2010, accounting for 8 of the top 10 deals by Chinese companies during the year. Amongst the key drivers of deal value during the fourth quarter was the spending by Chinese companies in Latin America. The largest deal of the quarter came from Sinopec acquiring a 40% stake in Repsol Brasil for $7.1 billion and gaining a foothold in the increasingly popular Brazilian offshore pre-salt reserves. This sector is about to undergo major development with the massive $43 billion deal by Petrobras and consequent financing paving the way for a development charge. The second largest deal of the quarter came from the acquisition by Bridas Corp (50% owned by CNOOC) of BP’s 60% stake in Pan American Energy, the second largest oil and gas producer in Argentina for $7 billion. Sinopec added further to China’s Argentinean assets by acquiring Occidental’s Argentinean E&P portfolio for $2.5 billion. The final major deal by a Chinese company came from CNOOC farming into a 33% stake in Chesapeake’s liquids rich Eagle Ford Shale assets. The deal marks the first major Chinese acquisition in the US since CNOOC’s failed attempt to acquire Unocal in 2005. In the effort to secure energy supplies to China’s booming economy the government has also entered into various loans for oil agreements. This strategy capitalised on the disparity of economic performance between China and the majority of the rest of the world, without the risk of potential hostility from another Chinese asset grab. Agreements are now in place with Brazil, Russia, Kazakhstan, Ecuador and Venezuela, with the latter receiving a loan of $20 billion.

Shale Focus Switches to Liquids

Whilst shale gas emerged as a key driver of US M&A in early 2010, shale oil has now started to take a more prominent position amongst the shale focused deals, with the Eagle Ford shale play in particular attracting a lot of interest during the quarter. There were 10 deals during the quarter involving the liquids rich portion of the Eagle Ford shale play, with a total value of $4.5 billion. The switch from gas bearing shale to liquids rich shale is due to the large difference in realisations from oil and gas in the US. Talisman has taken another route to attracting increased realisations from one of their shale properties. Talisman accepted a $1 billion farm-in from the South African integrated company Sasol in their Montney shale play in Canada. The key reason why Sasol was taken on as a partner is due to the company being amongst the global leaders in gas-to-liquids technology. The companies will be conducting a feasibility study for the construction of a gas-to-liquids plant and the case for the construction will gain strength should the gas prices remain low relative to liquids realisations. Shale gas deals still took the majority of the value amongst shale deals in the 4th quarter however with $7.4 billion worth of deals. The value was considerably boosted by the $4.3 billion acquisition by Chevron of Atlas Energy, a company with holdings in the Marcellus and Utica shale plays.

BP Closes in on Divestiture Target

  BP continued their asset divestiture program with $10 billion of asset sales in various countries during the quarter. The most significant sales by BP includes the $7 billion sale of the company’s 60% stake in Pan American Energy to Bridas Corp, the $1.8 billion sale of the company’s Venezuelan and Vietnamese assets to TNK-BP, the $775 million sale of the company’s Pakistan assets to United Energy Group and the $650 million sale of certain Gulf of Mexico assets to Marubeni. Since BP’s Macondo oil spill in April 2010 which prompted a $30 billion provision to be made by the company, $21 billion worth of divestitures have now been conducted by BP. In July BP reported that they are aiming for $30 billion of asset sales, which coupled with the company’s dividend freeze is aimed at fully satisfying the oil spill costs.

Lure of Going Private

As North American gas prices continued to remain suppressed hovering around $4 per mcf for much of the quarter, EXCO’s CEO Douglas Miller launched a bid to capitalise on the company’s relatively low valuation by launching a $5 billion bid to take EXCO private. The offer stands at a 38% premium to the day prior share price and at $5.30 per proved mcf of gas equivalent the offer represented a 60% premium to the day prior Henry Hub benchmark price. Fellow US gas producer, Quicksilver Resources also received an approach during the quarter from an investor group which includes the current CEO Glenn Darden to become private although an official offer has yet to be made. While gas prices in the US remain low, the owners of EXCO and Quicksilver will find it easier to cut back their capital spending and production away from the scrutiny of public shareholders until trading conditions improve.

About Evaluate Energy

Evaluate Energy is a leading provider Oil & Gas company and industry analysis its database software contains every vital piece of information on global oil & gas companies including; financial and operating data, M&A deals, financings, assets and forecasts. EvaluateEnergy gives you the edge in discovering actionable opportunities in global oil and gas. Fast, accurate, complete annual and quarterly data and analysis transforms your ability to analyse and compare the performance of the world's exploration and production companies.

Filed Under: Oil, Energy, Deals, Shale Gas,

About the Author's Company

EvaluateEnergy Profile Image Promotional
Evaluate Energy

It’s like having a team of experienced oil and gas analysts working for you day and night – but at a fraction of the cost. You will receive: Up-to-the-minute oil and gas company financial and operating data going back to 1989, including detailed upstream FAS69 data from the SEC, finding… ...read more or visit website »


As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.

Do you like this Post?
6 thumbs up
0 thumbs down
Share this post with friends

BP p.l.c. (BP) is an integrated oil and gas company. The Company provides its customers with fuel for transportation, energy for heat and light, lubricants and the petrochemicals products used to make everyday items, including paints, clothes and packaging. The Company operates in three business segments: Upstream, Downstream and Rosneft. The Upstream segment's activities include oil and natural gas exploration, field development and production; midstream transportation, storage and processing, and the marketing and trading of natural gas, including liquefied natural gas (LNG), together with power and natural gas liquids (NGLs). The Company's Downstream segment's activities include the refining, manufacturing, marketing, transportation, and supply and trading of crude oil, petroleum, petrochemicals products and related services to wholesale and retail customers. BP's interest in Rosneft, an oil company in Russia, is reported as a separate operating segment. more »

Share Price (Full)
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

  Is BP fundamentally strong or weak? Find out More »

What's your view on this article? Log In to Comment Now

You can track all @StockoChat comments via Twitter

About EvaluateEnergy


Evaluate Energy is a provider of up to date and accurate oil and gas analysis for industry professionals. 

Stock Picking Tutorial Centre

Related Content

Stock Picking Simplified

Stockopedia takes your stock picking to the next level with cutting edge Stock Reports & Screening tools.

Get started
or Take a Tour to find out more.
Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis