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Selling is new driver of US M&A, says PwC report

The US unconventional oil and gas sector are now driving merger and acquisition activity in the US

After five years of frenetic buying in the US unconventional oil and gas sector, divestitures are now driving the pace of merger and acquisition (M&A) activity in the US, according to a new report from consultancy PriceWaterhouse Coopers (PwC).

In its second quarter M&A report, PwC said activity remained “robust”, with the 39 deals recorded in the period $17.2 billion in total. However, activity had dropped from the 53 deals worth $30.4bn recorded in the second quarter of 2012.

On a sequential basis, the volume of deals dropped 5% compared to the first quarter of 2013, with the overall deal value falling by 37% during the same time period.

While the total volume and value of transactions decreased 26% and 43%, respectively, year-on-year, PwC said shale deals remained a key driver for M&A activity. In the second quarter, 15 shale deals contributed $7.5bn, or 44% of the value of all transactions reported. Upstream shale deals accounted for $3.1bn, while six midstream sector shale deals contributed $4.4bn.

Unconventional basins in Texas, North Dakota and Pennsylvania continue to attract the the greatest number of deals, and the highest transaction values.

The Eagle Ford contributed $1.5bn, followed by the Bakken with two deals totalling $910m, and the Marcellus Shale with three deals totalling $416m. PwC noted that there was no M&A activity in the Utica for the first time in seven quarters.

Doug Meier, the head of PwC’s US energy transactions, said companies remained focused on the task of integrating assets they acquired during 2012. This has resulted in a flood of fully priced assets hitting the market. The PwC report added  private equity funds have stayed on the sidelines, partly due to the increase in valuations.

However, interest from potential buyers in acquiring quality assets remains high. Meier said: “Well-positioned buyers have the right deal strategies, integration plans and controls in place to execute quickly on opportunities while successful sellers are providing a clearer and more transparent picture of their assets in order to minimise transaction timing.”

The second quarter of 2013 saw no announced deals from foreign buyers, representing a significant change from previous quarters. “Strategically, foreign buyers remain interested in US oil and gas assets,” Meier continued. “We expect foreign buyers to continue to be active players in the US oil and gas sector.”

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