Energy Finance

PLS Inc.’s and Derrick Petroleum Services’ October M&A report show an increase in U.S. and Canadian E&P deals. Global M&A activity for the third-quarter 2009 totaled nearly $21 billion in 112 separate transactions, the firms reported.

According to Brian Lidsky, managing director of research at PLS Inc., “Oil and gas deal volume increased markedly beginning in late August 2009 due to a confluence of events.”

Those events included a growing consensus that the economy bottomed in the second-quarter 2009 and that economic recovery is now underway, as well as a perception of oil price stability in the $65 to $75 per barrel range. Also, a “dramatic drop” of U.S. gas prices in late August through early September, near $2.50 per thousand cubic feet (Mcf), signaled a buying opportunity to the markets, the firms reported.

Oil and gas forward 12-month strips for third-quarter 2009 to year-end were $73.00 per barrel and $5.93 per Mcf, versus year-ago numbers of $99.02 per barrel and $8.15 per Mcf, they report.

Canada led the world in oil and gas transactions with total deal volume of $6.9 billion in 35 deals and “was home to the two largest deals of the quarter.” The largest global deal of the quarter was the $2.5-billion merger of Petrobank Energy and Resources and TriStar Oil and Gas Ltd., a value of $27.79 per barrel of oil equivalent of proved reserves. The merger formed a Bakken-focused light oil and gas E&P, PetroBakken Energy Ltd., to focus on the Bakken oil-shale and the Big Horn and Montney gas-shale plays of northeastern British Columbia.

The second largest deal was also an unconventional play in Canada. PetroChina International Investment Ltd. paid $1.7 billion to acquire a 60% working interest in Athabasca Oil Sands Corp.’s MacKay River and Dover in-situ oil sands projects. Recent independent assessments estimate 5 billion barrels of bitumen resources for the projects with regulatory approval expected in late 2009 for the first 35,000 barrel-per-day project.

Globally, the U. S. ranked as the second most active country in terms of deal value with $4.4 billion deals announced in 45 separate transactions, the firms reported. Regionally, Asia ranked second to North America with 11 deals totaling $3.8 billion, primarily in Kazakhstan and Turkmenistan. Africa saw seven deals for $2.4 billion while Europe had six deals for $2.3 billion. Australia accounted for six deals for $827 million. South America had only two deals worth a total of $187 million.

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