Glenn Cameron -
There was a significant increase in oil and gas M&A and related financing activity in 2014 compared to 2013. By the end of November the value of M&A transactions was over $46 billion, more than three times the aggregate value for the same period in the previous year.
Reasons for this increase in activity included:
- The extremely cold winter in North America increased natural gas prices and raised the values of natural gas producers.
- Several large US producers, including Devon, Apache and EOG Resources, consolidated their Canadian operations, disposing of non core properties. Devon’s sale of its Canadian conventional assets to Canadian Natural Resources for C$3.13 billion was the largest asset deal of the year.
- The shale plays in the Montney, Duvernay and other areas of Alberta and BC continued to attract investors looking for significant reserves in close proximity to proposed LNG projects on the West Coast of British Columbia. Kuwait Petroleum Corporation’s US$1.5 billion purchase of 30% of Chevron’s Duvernay assets and Apollo’s purchase of Encana’s Bighorn assets for C$1.9 billion were examples of these kinds of transactions.
- Access to capital markets provided the financing required for energy M&A transactions.
This increased activity occurred despite growing concerns that proposed pipeline projects to key export markets may be further delayed or even prevented by increased opposition to those projects, and notwithstanding a lack of significant participation in M&A from Asian acquirors, including state owned enterprises (SOEs). However, the rapidly declining oil prices rapidly declined in Q3 and Q4 of 2014 slowed the M&A activity by year end and the capital markets window for energy issuers closed.