US oil M&A jumps as private equity unloads shale assets

PDC Energy

25/07/2023 14:30

By Gary McWilliams
       HOUSTON, July 25 (Reuters) - U.S. oil and gas deals
rebounded in the second quarter as private equity firms shed
shale portfolio investments and publicly traded oil firms
grabbed smaller rivals.  
    U.S. oil exploration and production deals last quarter
soared to $24 billion - nearly three times that of the first
quarter, energy analytics firm Enverus disclosed on Tuesday. 
    There were 20 deals with an average value of $1.8 billion as
a stable U.S. oil price outlook has encouraged private-equity
buyers to exit properties. Oil futures are trading between $74
and $77 per barrel through April 2024. 
    The surge was due in part to energy focused private equity
firms EnCap Investments and NGP Energy Capital selling off a
combined six portfolio companies. In total, $14 billion in
private equity-owned assets have changed hands this year,
Enverus said. 
    "The formation of new private-equity backed E&Ps hit its
peak in 2017 and now, six years later those investments are
being unwound via sales to public companies," said Andrew
Dittmar, an Enverus director. 
    Private equity firms have moved away from oil deals, with
only 10 new exploration and production firm investments this
year compared to 100 per year last decade, Enverus said. 
    “Those inventors saw an opportunity to monetize deals they
had held longer than normal” and exit at higher valuations than
were possible a few years ago, said Jon Platt, a Baker Botts LLP
attorney who specializes in private equity and energy M&A. 
    Most M&A was in the top U.S. shale field as companies looked
to add oil acreage, Enverus' Dittmar said. Ovintiv  OVV.N  spent
$4.3 billion on three Permian Basin acquisitions, and Civitas
Resources  CIVI.N  spent a combined $4.7 billion for two
private-equity owned properties. 
    The quarter's biggest deal was Chevron's $7.6 billion bid
for PDC Energy  PDCE.O . 
    Noticeably absent from deals in the first half were natural
gas production companies, said Dittmar. U.S. gas prices trade
for less than half what they did a year ago on flat export
demand and gains by renewables at utilities. 

 (Reporting by Gary McWilliams, Editing by Nick Zieminski)
 ((Gary.McWilliams@thomsonreuters.com; +1 469-691-7668;))