The pace of M&A activity in the global E&P sector sustained the momentum of the first quarter with $42 billion of E&P deals announced in the second quarter of 2010. Evaluate Energy only includes officially announced deals in its analysis and excludes rumoured deals. The total value for the quarter is the second largest in the past three years (the biggest being Q4 2009, a quarter dominated by ExxonMobil’s $41 billion acquisition of XTO Energy) and has been strongly driven by increasing interest in the US shale sector from domestic and international companies alike. In total $12 billion worth of US shale gas deals were announced which represented over one quarter of global E&P deals.
US Shale Gas Attracts Global Attention
The shale gas sector accounted for the largest deal announced during the quarter with Royal Dutch Shell (LON:RDSA, NYSE:RDS.A) making their initial foray into the sector with its giant $4.7 billion acquisition of Marcellus shale gas specialists, East Resources, Inc.. Shell will instantly own over a million acres of prospective shale gas lands from this transaction, owning a shale gas portfolio that can only be bettered amongst the super-majors by ExxonMobil.
Another company making a bold entrance to into the US shale scene was Indian conglomerate, Reliance Industries (LON:RIGD) who farmed into two shale plays, the Marcellus shale in Pennsylvania with Atlas Energy, and the Eagle Ford shale in Texas with Pioneer Natural Resources. In total, Reliance has committed to spend $2.8 billion in cash payments and cost carry for their partners and will team up with two companies with significant experience in shale gas extraction.
A major part of the motivation for Reliance for the deals is for the company to gain experience in extracting gas from shale, with the US being far and away the leader in this field. Reliance’s home country, India, is estimated to contain abundant shale resources which have the potential to contain reserves in excess of the country’s conventional resources. Due to government imposed restrictions, unconventional resources in India have so far been substantially untapped with little exploration or development taking place. However on the back of the success of the US shale gas plays, the government has recently declared that policy will be in place for companies to take advantage of the resource within a year. At that time Reliance will aim to have…
