Upstream U.S. merger and acquisition activity has rebounded in the second quarter to $2.6 billion, largely driven by deals targeting gas-producing Appalachian assets, Kallanish Energy reports.
A resurgence in U.S. upstream M&A deals during the second quarter represents a 230% increase quarter-on-quarter, according to new figures published by Texas-based Enverus last week. However, Q2 2020 still ranks as the third lowest quarterly value since 2009.
Activities largely collapsed in the first quarter of 2020, with deals totalling $770 million — less than 10% of the $8 billion average for first quarter from 2010-2019.
Enverus said that three of the five largest deals conducted during Q2 were focused on the Appalachian basin. The largest such deal was Shell’s sale of its upstream and midstream businesses in Appalachia to National Fuel Gas for $541 million.
Elsewhere, private investor Sixth Street Partners acquired an overriding royalty interest by Appalachian producer Antero Resources for $402 million and Diversified Gas & Oils $125 million purchase of upstream and midstream oil and gas assets from EQT Corp.
Enverus noted that gas increased its share of M&A from 5% in 2019 to 30% year-to-date and that gas assets are likely to continue to transact, as long as future pricing supports deals, throughout the rest of 2020.
“With the uncertainty around oil, the limited buyers largely targeted low-cost natural gas assets during Q2,” said Andrew Dittmar, senior M&A analyst at Enverus. “Relatively strong future pricing is likely driving demand for gas assets. While the spot market for natural gas is still suffering from low prices, the future curve 12 or 24 months out is significantly higher.”
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