Value of oil mergers rose 25 percent in 2021

The value of mergers and acquisitions in the oil industry rose by 25 percent last year but remained far below the average during pre-pandemic years.

Oil producers inked 179 mergers and acquisitions worth $66 billion in 2021, according to a report from Austin energy research firm Enverus.

Although the value of mergers and acquisitions increased last year, Enverus found that the level of activity and value remains far below pre-pandemic levels. The upstream energy sector struck on average almost 400 deals totaling around $72 billion annually from 2015 to 2019.

“Since the emergence of COVID, upstream mergers and acquisitions have been characterized by fewer, but larger deals,” said Andrew Dittmar, director at Enverus. “The volume of deals remained depressed with 172 and 179 transactions in 2020 and 2021, respectively, versus an average of nearly 400 deals per year before COVID.”

The pandemic itself, however, has become a catalyst for consolidation as companies look to pool resources and cut costs to weather the industry’s boom and bust cycles.

Some of the largest deals during the fourth quarter of 2021 include Continental Resources’ acquisition of Delaware Basin assets from Pioneer Natural Resources for $3.25 billion and Southwestern Energy’s acquisition of GEP Haynesville for $1.8 billion.

This year, not even a month old, has already seen two major deals.

Houston-based Enterprise Products Partners on Monday said it plans to acquire The Woodlands-based Navitas Midstream Partners for $3.5 billion in one of the largest acquisitions of a private natural gas gathering and processing business.

On Wednesday, Denver-based Desert Peak Minerals announced plans to merge with Houston-based Falcon Minerals for $1.9 billion, creating a leading mineral rights and royalties company with a large footprint in the Permian Basin.

Enverus said oil producers this year appear to be most interested in deals involving oil wells in the Delaware Basin of West Texas and natural gas wells in the Haynesville shale field of East Texas.

But the research firm said it expects fewer multi-billion-dollar deals this year as crude prices improve, easing pressure on smaller oil companies to sell.

The field of potential acquisition candidates is narrowing as higher revenues and company values make it harder to find bargains. In addition, many oil companies still have too much debt after years of chasing growth, making them less attractive targets .

This wave of consolidation could have a long tail, however, as newly combined companies sell oil and gas properties that don’t fit within their existing portfolios.

“Big time corporate M&A often leads to a subsequent wave of asset deals as buyers prune their expanded portfolios,” Dittmar said. “There was a bit of this during 2021 with non-core asset sales by Pioneer and Diamondback Energy, another buyer from the 2020 merger wave. There should still be plenty of room to run for deals though and we anticipate this to drive a resurgence in mid-size, asset-level deal making.” paul.takahashi@chron.com twitter.com/paultakahashi