Although mergers and acquisitions happening in the energy industry may not be receiving much hype, it is important to note that the number of deals being made were actually up compared to last quarter. According to an M&A report from PwC, the reported change is mostly being led by Houston energy companies.
Let’s break down the numbers in order to analyze exactly what transpired during the second quarter. Over the course of the last three months there was a total of 47 oil and gas deals that were struck. The deals were said to be valued at $38.8 billion. How does this compare to the first quarter of this year? In the first quarter, there were just 39 deals made that were said to be worth $34.5 billion according to PwC.
A closer look at the report reveals that almost half of the deals that took place in the second quarter were midstream deals. A total of 21 midstream deals, which were valued at $27.7 billion, were part of the mergers and acquisitions activity. This is a 130 percent increase compared to last year during the second quarter.
Six energy companies based in Houston played a part in the 12 corporate midstream deals in the second quarter of this year.
A leader in the U.S. energy transactions and deals at the PwC in Houston recently commented on the popularity of midstream deals. He stated that the launch of MLPs (master limited partnerships) was one reason for the shift. Many are starting to see the advantages of MLP rollups and consolidations data counting toward PwC M&A. Therefore, many MLPs are beginning to show up this year. Another reason for the popularity in M&A has to do with growth and distribution. More specifically the speedier growth they provide since MLPs were known to provide slow-moving returns. Now the use of M&A is seen as a way to obtain cash more quickly according to this leader who has knowledge on the subject.
On the other side of the coin, we can see a decline in upstream deals. The decrease amounted to a total of 18 transactions in the second quarter that were said to be worth $8.3 billion. According to PwC, this is a 55 percent decrease in deal volume and a 67 percent decrease in deal value from last year. However, this trend could shift again in the remaining quarters of this year. There are models and expectations that are forecasting that upstream companies will look towards M&A later in the year.