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U.S. Oil And Gas M&A Soar 250% In Q3 To Highest Since 2012

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Thanks to the consensus view of stable to higher oil prices, U.S. oil and gas mergers and acquisitions (M&A) activity in the third quarter jumped by 250 percent from Q2 to stand at a total of value of US$32 billion, energy data analytics company Drillinginfo said on Thursday.

The value of the Q3 M&A activity in the U.S. oil and gas industry broke all quarterly records dating back to the fourth quarter of 2012. The US$32-billion worth of M&A deals was 76 percent higher than the quarterly average of US$18.3 billion since 2009, Drillinginfo said.

The factors for the record-breaking Q3 M&A activity included more than US$50 billion worth of deals for sale as of July 1, and the view that oil prices will be stable or higher going forward.

The deal highlight during the third quarter was BP buying world-class assets from BHP in the Permian, the Eagle Ford, and the Haynesville basins for US$10.5 billion—the biggest acquisition for BP since buying Arco in 1999.

The other notable deal in Q3 was Diamondback Energy buying Energen in an all-stock transaction valued at around US$9.2 billion, which creates the third-largest pure play Permian company in terms of production.

The Diamondback Energy-Energen deal value is just shy of the Permian record of US$9.5 billion paid by Concho Resources for RSP Permian in the first quarter this year, Drillinginfo says, noting that the Concho and Diamondback deals in the Permian are the start of a trend toward consolidation in the shale patch, rather than “one-off style hits.”

Related: Gazprom's Bid To Maintain European Energy Dominance

Drillinginfo expects the M&A activity to remain high over the next six to 12 months, as there are deals worth US$30 billion for sale. Consolidation will likely continue, while the Permian takeaway capacity constraints could be strategic opportunities for deals over the next 18 months.

“Shale basin consolidation will be a continuing theme supplemented by occasional major new entrants for those few large and global companies who have not yet established a significant shale presence. Private equity and private companies will continue to play a role in deploying carefully calculated risk dollars to fringe areas and benches within established resource plays plus advancing today's technology to new areas like the Powder River Basin as well providing inventory as they move to divest mode,” Drillinginfo Senior Director Brian Lidsky said.

By Tsvetana Paraskova for Oilprice.com

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