HOUSTON -- Six months after the end of a markedly slow year for the oil and gas A&D market, deal flow seems to have returned to normal, according to Bill Marko, managing director at Jefferies & Co. Marko noted that over the past three quarters, deal volume has returned to $15 to to $20 billion per quarter, putting it on track to reach the 2010 to 2012 average of $71 billion or greater.
“Conditions are really right for a ton of deals this year,” Marko said, addressing attendees of Hart Energy’s Entrepreneurs’ Forum on June 9. “There were $37 billion as of this morning. I think there will be $100 billion in deals this year.”
This is a steep change from 2013, which saw $7 billion in deals per quarter. “2013 became the year to digest in deal flow,” Marko said.
Marko attributed the recent high volume to the fact that MLPs continue to be active in the market, natural gas prices are improved, the national economic outlook is better and private equity firms are emerging as active buyers.
Private equity alone has $35 to $40 billion to spend on deals, which, when combined with debt, “could become $100 billion in purchasing power,” Marko said.
Marko also noted the following emerging trends:
●More gas deals will happen in the near future as a result of improved, firmer natural gas prices.
●“Super high-quality, singlebasin-focused companies” are extremely strong right now, Marko said. He cited Antero Resources Corp. (NYSE: AR), Diamondback Energy Inc. (NASDAQ: FANG), Athlon Energy Inc. (NYSE: ATHL), Pioneer Natural Resources Corp. (NYSE: PXD) and RSP Permian Inc. (NYSE: RSPP) as examples.
●Many companies are reshaping their portfolios after a year of investor activism. “One of the things that chilled the deal flow in 2013 was all the activist investors ... you had a lot of these companies that had activism in their stocks and now you’re seeing the results of these changes,” Marko said. He added that companies are seeing a need to rebalance their portfolios from gas to liquids, and that they are trimming noncore assets to improve performance.
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