First-quarter U.S. upstream acquisitions cost more than they have in several previous quarters. The 37 deal announcements during the period-totaling $6.6 billion-had an implied reserve value of $7.33 per barrel of oil equivalent ($8.11 per BOE for stock deals and $5.99 per BOE for asset deals), compared with $6.14 in all of 2002 and a fourth-quarter 2002 average of $6.90. The figures are according to Houston-based A&D advisory firm Randall & Dewey Inc. in its newest quarterly "Acquisitions Review." "2003 is off to a fast start," the firm reports. (All dollar values are U.S.) It expects 2003 transaction activity will surpass that of 2001. That's for U.S. and non-North American assets. Interest in Canadian assets continued to wane some during the first quarter. Canadian companies and assets went for an average of $3.32 per BOE during the period, compared with an average of $5.27 during 2002 and a fourth-quarter average of $7.12. A lot of the lower average value is due to EnCana Corp.'s $704-million oil-sands asset sale to Canadian Oil Sands Trust for an implied proved reserve value of $2.03 per BOE, Randall & Dewey reports. The prolific oil-sands assets cost more to develop and produce than normal-flowing North American reserves, so their market price is lower. Otherwise, the first-quarter median value for Canadian assets was $7.05 per BOE-near the fourth-quarter 2002 level-according to Randall & Dewey. Meanwhile, first-quarter non-North American transactions had an improved average implied proved reserve value: $3.48 per BOE, compared with a $2.85 average during 2002 and a fourth-quarter average of $1.81. The dollar volume ($6.6 billion) of first-quarter deals for U.S. companies and assets is nearly that of all of 2002 ($10.0 billion). More than 10 deals during the quarter fetched more than $100 million each and represent 92% of the quarter's total dollar volume. These large U.S. deal announcements were primarily Devon Energy Corp.'s plan to acquire Ocean Energy Inc., which was recently consummated ($3.5 billion; $8.88/BOE); Apache Corp.'s acquisition of BP Plc Gulf of Mexico assets ($509 million; $7.05/BOE); and Chesapeake Energy Corp.'s acquisition of El Paso Corp.'s Midcontinent assets ($500 million; $7.54/BOE). The current industry environment could be described as "challenging uncertainty to find opportunity," the firm reports: North American gas production is in decline, the economy remains weak, the stock market continues to struggle, there is post-war uncertainty in the Middle East and commodity-price volatility is high. Yet buyers appear to be more fearless-and hungry-this year than they were last year. To keep up with its growing non-North American business, the firm has opened an office in London. Non-North American deal announcements during the first quarter totaled 19 ($10.1 billion). The largest announcement was BP's $6.1-billion offer for stakes in Tyumen Oil Co. In contrast, announcements during all of 2002 for non-North American assets totaled $14.5 billion and numbered 63. As for Canadian deal announcements during the first quarter, these totaled 34 and $1.6 billion, with nearly half of that total value from the EnCana-Canadian Oil Sands Trust asset transaction. Announcements during all of 2002 for Canadian companies and assets totaled 133 and $9.4 billion. "While upstream companies are minting cash-commodity prices are high and service costs are relatively low-current E&P valuations are substantially below where they were just a few years ago," the firm reports. "Assessing this disconnect, many believe that this is an excellent opportunity to build shareholder value. Skeptics, however, note that past industry optimism on natural gas prices has not always been rewarded. From the perspective of the [asset] market, the larger anticipated volume should be an excellent test of buyers' confidence." Worldwide, 361 deals were announced during 2002 for a total value of $40.7 billion. During just the first quarter of 2003, there were announcements totaling nearly half that much dollar value. "Looking forward, the concerns over continued commodity-price volatility dampening the [asset] market seem to be abating as attention is focused on the current 12-month futures curve above $5 per thousand cubic feet (Mcf) and the following years well above $4," the firm reports. "Although declining domestic natural gas production, signs of natural gas demand destruction, storage withdrawals and refills continue to resonate throughout industry natural gas discussions, could it be that the 'good old days' of the domestic natural gas industry lie ahead? Perhaps only when investors give up their cautious stance on the energy sector." Some other significant first-quarter U.S. deal announcements and implied reserve values are as follows: • Plains Exploration & Production Co. LP's purchase of 3Tec Energy Corp. ($417 million; $8.50/BOE); • The management-led buyout of Exco Resources by Exco Holdings ($339 million; $5.24/BOE); • Nexen's purchase of BP's Aspen Field properties in the Gulf of Mexico ($136 million; $8.50/BOE); • The Sacramento Municipal Utility District's purchase of El Paso's San Juan Basin properties ($135 million; $4.96/BOE); and • Evergreen Resources' acquisition of Carbon Energy Corp. ($108 million; $9.58/BOE). Large non-U.S. announcements include Gaz de France's purchase of Preussag Energie's European assets ($1.0 billion); Apache's acquisition of BP's Forties Field ($737 million; $4.99/BOE); CNOOC's acquisition of BP's former Soviet Union assets ($615 million; $0.57/BOE); Rosneft's share acquisition of Severnaya Neft ($600 million); and ARC Resources' share purchase of Star Oil & Gas Ltd. ($429 million; $5.93/BOE). -Nissa Darbonne