Upstream M&A and capital raising deals in Q3 fall by 50% in value from Q2

GlobalData Energy 7 November 2019 (Last Updated September 14th, 2020 10:05)

On the volume front, the number of deals decreased by 20 per cent from 338 in Q2 2019 to 269 in Q3 2019.

Upstream M&A and capital raising deals in Q3 fall by 50% in value from Q2

Global M&A and raising activity in the upstream oil and gas sector totalled US$63.4bn in Q3 2019. This was a 50 per cent decrease from the US$126.8bn in Q2 2019. On the volume front, the number of deals decreased by 20 per cent from 338 in Q2 2019 to 269 in Q3 2019, according to a report by GlobalData. 

GlobalData’s latest report, ‘Quarterly Upstream M&A and Capital Raising Deals Review – Q3 2019’, shows that a total of 90 M&A deals, with a combined value of US$13.7bn, were recorded in the conventional segment, and 36 deals, with a combined value of US$17.1bn, were recorded in the unconventional segment in Q3 2019. 

Capital raising, through equity offerings, witnessed a substantial decrease in deal values, recording US$1.2bn in Q3 2019, compared with US$14.5bn in Q2 2019. The number of equity offering deals also decreased by 17 per cent from 109 in Q2 2019 to 90 deals in Q3 2019. Capital raising, through debt offerings, registered a decrease of 17 per cent in the number of deals and a marginal increase in deal value with 43 deals, of a combined value of US$30bn, in Q3 2019, compared with 52 deals, of a combined value of US$29.1bn, in the previous quarter. 10 private equity/venture capital deals, with a combined value of US$1.4bn, were recorded in the upstream industry in Q3 2019, compared with 13 deals, with a combined value of US$504.2m, in Q2 2019.

The top M&A deal of Q3 2019 was BP’s agreement to sell its entire upstream and midstream business in Alaska to Hilcorp Energy, for a consideration of US$5.6 billion. 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 advisor to Hilcorp in the transaction. The transaction is in line with Hilcorp’s historical strategy of acquiring mature fields from major oil companies and slashing costs.

One of the top capital raising deals of Q3 2019 was Petroleos Mexicanos’ public offering of notes for gross proceeds of US$7.5bn. BofA Securities, Inc, Citigroup Global Markets Inc, Credit Agricole Securities (USA) Inc, Goldman Sachs & Co LLC, HSBC Securities (USA) Inc, JP Morgan Securities LLC and Mizuho Securities USA LLC acted as joint book-running managers to the company for the offering. The company intends to use the net proceeds from the offering for its general corporate purposes, including the repayment of short-term loans.