Page 4 - NorthAmOil Week 07 2023

NorthAmOil COMMENTARY NorthAmOil

Surge anticipated in US oil M&As in

2023 after slowdown last year

Merger and acquisition activity in the US oil industry slowed last year but

could rebound in 2023 as public companies seek new inventory and private

equity players continue to sell up

US IN 2022, US upstream mergers and acquisitions Private and public
(M&As) totalled $58bn across 160 deals, with Private equity sellers have been responsible for
WHAT: $13bn transacted in 26 deals during the fourth most of the assets on the market in recent years,
US oil and gas M&A quarter, according to Enverus Intelligence and Enverus said it expected that trend to con-
activity could rebound Research. The figure for the whole of 2022 was tinue. These capital providers are seeking to
this year after slowing down 13% compared with 2021. unwind substantial investments in oil and gas,
in 2022. Deal values were down by about 20% from either because they are coming up against the
pre-pandemic levels, and the volume of deals end of a fund life, or for environmental, social
WHY: has declined to a nearly 20-year low, said the and governance (ESG) reasons – or both.
Private equity players research company. Volatility in the oil and gas Concurrently, public companies’ appetite for
continue to sell out of markets contributed to making deals harder to inventory gives them an ideal window to sell.
the space, while public finalise. However, there are few fire-sale bargains to be
companies are seeking Even so, large companies drove M&A activity had, and sellers are willing to walk away from a
new inventory. in 2022 by targeting high-quality assets in bil- deal if none of the offers meet their minimum
lion-dollar-plus deals. They could continue the price. This further complicates matters for small
WHAT NEXT: activity in 2023 given their high profits for the companies.
Producers are also previous year, some analysts have suggested. “There are a few options available for small
looking at how best “These [large-cap] buyers have the balance cap companies struggling to secure inventory
to spend the profits sheet strength and favourable stock valuations in the current market,” said Dittmar. “Corpo-
accumulated in recent to take advantage of large, high-quality offerings rate M&A hasn’t been a significant part of the
months. from private sellers,” said an Enervus director, market since 2020, but we could see a return to
Andrew Dittmar. “Critically, they can strike public company deals this year either from small
deals that are both accretive to current cash flow companies combining in mergers of equals to
and extend their runway of drilling locations,” build scale and hopefully get a higher multiple
he added. on their stock or selling to larger competitors
“For smaller companies, which are still having that already trades at a premium valuation.”
their equity value discounted, it is challenging to According to Enverus, the need for public
thread the needle of buying assets at accretive companies to secure inventory is likely to keep
multiples and being able to pay for inventory,” the M&A market active in 2023. However, the
he continued. challenge for those making the deals will be

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