Oil and gas M&A deal-making in July rose from year-ago levels despite a lack of substantial North American corporate consolidation, according to S&P Global Market Intelligence data.
The industry announced 10 more whole-company and minority-stake deals in July 2021 than in July 2020: 42 deals compared to 32. In the same period, the combined value of deals rose from $16.29 billion to $21.12 billion due largely to a pair of major deals involving international oil and gas producers. The number of announced asset transactions decreased from 41 to 37, and their aggregate value plunged nearly $9.5 billion to $2.32 billion.
Compass Gas e Energia SA's $9.18 billion acquisition of a 51% stake in Petrobras Gás S.A. - Gaspetro was the biggest deal announced in July. The deal is pending approval by shareholders and Brazil's national competition regulator.
Also in July, Santos Ltd. agreed to merge with Oil Search Ltd. for $8.81 billion. Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share held and will own about 38.5% of the merged group, with Santos shareholders owning about 61.5%.
There were no major North American asset-level transactions announced in July.
"Our conversations with public [exploration and production companies] suggest most companies have no plans for any major M&A until their stock prices are at what they deem more reasonable levels and the bid/ask spread comes back more in buyers favor," Truist Securities analysts Neal Dingmann and Jordan Levy wrote in an Aug. 11 note. "We believe prices for proposed deals have been relatively inflated since April after Pioneer Natural Resources Co. acquired DoublePoint Energy LLC for about $35,000 per acre, assuming about $30,000 per flowing barrels of oil equivalent."
However, the analysts said a "select few" public producers "might be positively rewarded for completing the 'right' deal," which they described as a mostly equity offer with an attractive valuation and potential to quickly contribute to free cash flow. Truist mentioned Devon Energy Corp., ConocoPhillips, Marathon Oil Corp. and Diamondback Energy Inc. as producers whose balance sheets and operational track records could make an acquisition worthwhile.
