In the oil and gas universe, higher prices cure nearly all ills.

A year after the cataclysmic events of 2020’s oil price war and pandemic, U.S. oil and gas M&A values ascended to $3.4 billion. This time last year, U.S. upstream oil and gas transactions limped to a first quarter finish with roughly a fifth of that value—$600 million, according to a new report by Enverus, the data analytics firm.

“It was brutal in first quarter 2020,” Andrew Dittmar, senior M&A analyst at Enverus, told Hart Energy. “I think that was the lowest quarter we had on record.”

So far, the second quarter of this year has started promisingly. On April 1, Pioneer Natural Resources Co. agreed to buy DoublePoint Energy for $6.4 billion. The deal is the largest acquisition of a private E&P in a decade, Enverus said.

On April 8, Enverus released its first-quarter 2021 summary of deals, which showed an 88% decline from fourth-quarter 2020 deal value.

From January to the end of March, deal activity largely focused on PDP heavy assets in legacy oil plays.

The Bakken and Eagle Ford accounted for two-thirds of total deal value despite having only three significant deals across the two plays—two in the Bakken and one in the Eagle Ford. The Permian Basin, which has often stolen the spotlight in the past several years, fell to about 14% of first-quarter transactions. In 2020, Permian deals made up 82% of deal value.

Source: Enverus

Top First-quarter 2021 Deals

 Date Value
($MM)
Buyer Seller Play
 2/10/21 $900 Grayson Mill Equinor Bakken
3/24/21 $880 Validus Energy Ovintiv Eagle Ford
1/25/21 $465 Enerplus Bruin E&P Bakken
1/31/21 $420 Surge Energy Grenadier II Midland
1/31/21 $250 Northern Oil and Gas Reliance Marcellus

The next two largest deals were sales by Bruin E&P (formerly private equity-backed and then owned by creditors following a bankruptcy reorganization) and Grenadier Energy Partners II, which was sponsored by private capital providers EnCap Investments LP and Kayne Anderson Capital Advisors LP.

DoublePoint, with multiple private equity sponsors, adds further indications of a shift toward private upstream activity. After powering through with $24.9 billion in corporate consolidation moves, mergers fell to about $500 million in the first quarter. Asset transactions nudged up to $2.9 billion from $2.5 billion in the fourth quarter.

“After most of 2020’s activity was dominated by mergers between public companies, we are seeing private equity play a more prominent role in M&A markets in 2021,” Dittmar said.

“Following years of heavy investment in unconventional resources, private E&Ps were having a challenging time finding exits either through sales or IPOs and had consequently tamped back spending on new deals,” he continued. “Now, in December 2020 and continuing into 2021, we have seen several prominent exits plus new investments from the private side of the industry.”


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M&A should continue to flow more easily with elevated commodity prices, he added. One sign of returning strength is the first IPO of a traditional upstream company since 2017 as Haynesville operator Vine Energy Inc. began trading on the public markets.

It’s likely that a shift in market conditions will draw buyers to asset-level deals and possibly make smaller public company combinations appetizing, Dittmar said.

“The economics are there to support a lot more transactions. A lot more areas of economic at this point,” he said. “The problem that we saw in late 2020 was that only so many of those big public, corporate deals get done. There’s just not that many ConocoPhillips-Concho or Chevron-Noble deals out there.

“That doesn’t mean we couldn’t get another big deal. There’s just a lot fewer left to do.”

While many of the marquee names in the public E&P space in the Permian Basin found deals in 2020, there is additional room to combine operations among small- and mid-size Permian operators. Additional consolidation opportunities also remain in areas like the Appalachian Basin and Bakken that have yet to see anyone play a dominant role as consolidator.