Experts: Midstream M&A Primed to Take Off

DUG Permian panelists acknowledge the challenges posed by ESG and climate concerns in the post-COVID finance environment, but expect cheap debt and higher valuations to push midstream deals forward.

Pete Bowden, global head of energy and power at Jefferies LLC; Brett Knowles, vice president of EnCap Flatrock Midstream; and Bill Brown, managing director and executive vice president of energy banking for Cadence Bank, at the DUG Permian and Eagle Ford Conference & Exhibition. (Source: Joseph Markman/Hart Energy)

Pete Bowden, global head of energy and power at Jefferies LLC; Brett Knowles, vice president of EnCap Flatrock Midstream; and Bill Brown, managing director and executive vice president of energy banking for Cadence Bank, at the DUG Permian and Eagle Ford Conference & Exhibition. (Source: Joseph Markman/Hart Energy)

The big deal in midstream finance is that the big deals are on the way, an M&A expert indicated at the recent DUG Permian and Eagle Ford Conference & Exhibition.

“I think we’re heading into a constructive period after what has been a very painful period,” Pete Bowden, global head of energy and power at Jefferies LLC, said during a midstream finance roundtable.

Asset-level midstream transactions fell by about 14.5%, or $24.9 billion to $21.3 billion from 2019 to 2020, Jefferies found. What was striking, however, was the collapse of the gathering and processing share of transactions.

It won’t stay that way. Bowden’s experience of more than two decades in the sector has allowed him to observe patterns, and one is that midstream typically lags E&P by 12 to 18 months. He sees that as good news for midstream next year as rig counts ramp up and M&A activity moves closer to the wellhead. Gathering and processing companies can be expected to return to the transaction realm.

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Joseph Markman

Joseph Markman, senior editor for Hart Energy, covers markets and provides data analysis for all Hart Energy editorial products.