Q3 M&A deals in midstream sector down 75% on Q2

GlobalData Energy 29 October 2019 (Last Updated September 14th, 2020 10:06)

On the volume front, the number of M&A deals increased by 20 per cent from 80 in Q2 2019 to 96 in Q3 2019.

Q3 M&A deals in midstream sector down 75% on Q2

GlobalData’s latest report, Quarterly Midstream M&A Deals Review – Q3 2019, shows that a combined value of US$24.2bn in mergers and acquisitions (M&A) were announced in the midstream sector in Q3 2019.

This was a substantial decrease of 75 per cent from the US$95.3bn in M&A deals announced in the previous quarter.

A year-on-year comparison shows a decrease of 2 per cent in the number of deals and 74 per cent in values in Q3 2019, compared to 98 deals with a combined value of US$94.3bn in Q3 2018. During the quarter, there were 24 M&A deals with values greater than US$100m, together accounting for US$23.1bn.

BP’s agreement to sell its entire upstream and midstream business in Alaska to Hilcorp Energy, for a consideration of US$5.6bn, was one of the top deals registered in Q3 2019. Following the transaction, BP will exit from Alaska oil and gas business.

The upstream assets include interests in Prudhoe Bay (26 per cent), Milne Point (50 per cent), Point Thomson (32 per cent), Liberty project (50 per cent), and non-operating interests in exploration leases in Arctic National Wildlife Refuge.

The midstream assets include interests in Trans Alaska Pipeline System (49 per cent), Alyeska Pipeline Service Company (49 per cent), Point Thomson Export Pipeline (32 per cent), Milne Point Pipeline (50 per cent). And the other interests in Prince William Sound Oil Spill Response Corporation (25 per cent). BP’s net oil production from Alaska in 2019 is expected to average almost 74,000 barrels per day (bd). Baker Botts is acting as legal advisor to BP and Kirkland & Ellis LLP is acting as legal adviser to Hilcorp in the transaction. The transaction is in line with Hilcorp’s historical strategy of acquiring mature assets from major oil companies and slashing costs.

On the volume front, the number of M&A deals increased by 20 per cent from 80 in Q2 2019 to 96 in Q3 2019, of which 54 were cross border transactions and the remaining 42 were domestic transactions. Europe was the destination of choice for cross-border M&A activity in Q2 2019, recording 19 cross-border transactions in the quarter.

Regionally, North America remained the frontrunner in terms of deal value in Q3 2019, with 78 per cent share, registering a combined M&A value of US$19bn, from 24 deals. Europe led the M&A market in terms of number of deals in Q3 2019, registering 35 acquisitions, of which 19 were cross-border and the remaining 16 were domestic acquisitions, while Asia accounted for 13 global deals, or 13 per cent in Q3 2019, of which eight were cross-border acquisitions and the remaining five were domestic acquisitions. Africa and Oceania registered seven and six deals respectively in Q3 2019, South America accounted for 12 per cent of global deals (or 12 deals) and the Middle East posted only one M&A deal in Q3 2019.