$48 Billion in Oil and Gas Deals Announced First Quarter 2010

HOUSTON, May 5 /PRNewswire/ -- PLS, Inc. ("PLS") in conjunction with its international partner, Derrick Petroleum Services ("Derrick"), reports that Global M&A activity for the 1st Quarter 2010 totaled $47.7 billion in 157 separate transactions, the second highest dollar volume in the last two years.

According to Richard Mason, Director of Research at PLS, Inc., "Capital requirements needed to develop sizeable property packages long-term plays a significant role on oil and gas transactions announced during Q1 2010. The trend is providing buyers access to promising plays globally while sellers have opportunities to monetize future assets for cash, or, alternatively, join with partners to defray development costs."

Deal flow remains robust following a trend that began in late summer 2009 on anticipation of a global economic recovery. Continuing interest in transactions suggests a market featuring attractive assets at reasonable prices in the wake of strong crude oil performance. Oil-biased deals represented 58% of dollar volume globally while asset deals increased dramatically to 65% of total deal value and corporate deals accounting for the remaining 35%. This stands in contrast to the sharp bias during 2009 towards corporate transactions, which represented 70% of deal value.  The share of corporate transactions in 2007 and 2008 was very similar to that in Q1 2010.

Regionally, North America led the world in oil and gas transactions (see Table 1) with total deal volume of $23.8 billion, or 50% of transactions by dollar volume. The United States and Canada accounted for 116 of the 157 deals reported for the quarter, or roughly 74% of all transactions. (See Table 1).

In dollar value, North America was followed by the Former Soviet Union ($9.7 billion), Africa ($7.02 billion), South America ($3.5 billion) and Australia ($3.4 billion).

One new wrinkle in Q1 2010 involved continued global expansion among Chinese national oil companies (NOCs) who found entree into international markets through joint venture arrangements. These include Chinese National Offshore Oil Company's (CNOOC) $3.1 billion JV with Bridas Energy for its South American assets, including a 40% interest in Pan American Energy LLC (BP Plc owns the remaining 60% interest). CNOOC, together with Total, is also in the running for a stake in Tullow's massive discoveries in Uganda.

Elsewhere, PetroChina teamed up with Royal Dutch Shell to acquire Australia's Arrow Energy for $3.2 billion. PetroChina is expected to play a key role in tying up customers for Arrow Energy's coalbed methane gas to LNG projects.

The BP/Devon Energy Corporation $7 billion transaction led all deals globally as Devon divested its remaining deepwater Gulf of Mexico holdings as well as its 5.6 percent share in the BP-operated Azeri-Chirag-Gunashli (ACG) Caspian Sea project in Azerbaijan. BP expanded its position in Brazil's deepwater play in South America. BP now has a commanding acreage position in the Gulf of Mexico's emerging Paleogene play and a platform from which it can compete head to head with rival ExxonMobil for the leading spot among International Oil Companies (IOCs) in global production. ExxonMobil previously acquired XTO Energy for $41 billion in December 2009.

By commodity type, oil accounted for $26.2 billion of transaction volume, or 55 % of deal value during the quarter, while natural gas oriented transactions fell just shy of $14 billion, or 29% of deals.  Deals that involved a mixed commodity base, generated $6 billion in volume, while transactions related to oil sands reached $1.6 billion during the quarter.

Ten deals topped $1 billion globally during the quarter, the same number that occurred in Q4 2009. Both the U.S. and Africa witnessed three deals of $1 billion or greater, while corporate asset sales in Russia accounted for two multi-billion deals. Argentina and Australia each hosted transactions above $3 billion during Q1 2010.

"Joint venture arrangements are growing in volume and size globally, further illustrating how oil and gas companies are addressing the capital challenges facing the industry," according to Mason.

U.S.A.—1st Quarter 2010 E&P Mergers and Acquisitions continue to increase

In the United States, deal activity rose nearly 7% to 64 announced transactions versus 60 in Q4 2009, and just 21 in Q1 2009, while total dollar volume fell 64% sequentially to $19.114 billion. Of course, the Q4 2009 totals ($53.3 billion) were buttressed by the $41 billion ExxonMobil/XTO Energy transaction. Backing out ExxonMobil/XTO the U.S. has seen quarterly transaction values of $19.114 billion (Q1 2010, 64 deals); $12.357 billion (Q4 2009, less XTO, 59 deals); $4.262 billion (Q3 2009, 46 deals); $3.876 billion (Q2 2009, 46 deals); $405 million (Q1 2009, 21 deals) and $5.692 billion (Q4 2008, 32 deals).

The U.S. witnessed 18 conventional production deals totaling $7.1 billion during the quarter compared to 16 deals and $7.533 billion in value during Q4 2009. Valuations rose 6.4% during the quarter to $88,438 per BOE/D versus the prior quarter while the price for proved reserves dropped 19% to $12.87 per BOE.

Despite softening natural gas prices - natural gas oriented transactions represented 64% of volume by dollar value with oil oriented deals at 21%, (assuming $2 billion as the value of the GOM assets sold by Devon to BP). Breaking it down further, natural gas was even the dominant commodity driver in Q1 2010 conventional production transactions, accounting for 77% of deal value.

CONSOL Energy's $3.475 billion acquisition of Dominion's remaining oil and gas producing assets topped all U.S. deals during the quarter as the Appalachia's largest coal company sought to diversify its commodity base. CONSOL followed that announcement a week later by offering to buy the 17% of CNX Gas that it did not already own for $985 million transaction. Dominion exits the oil and gas exploration and production sector with the sale to CONSOL.

A new angle surfaced during the quarter when two E&P Master Limited Partnerships (MLPs) announced transactions of producing assets including Linn Energy's purchase of HighMount E&P's Antrim Shale properties in Michigan and EV Energy Partners' acquisition of Appalachian conventional gas assets from Range Resources. The transactions were valued at $330 million each. Separately, Linn Energy acquired $305 million in Permian Basin producing properties during the quarter. The E&P MLP sector has become more active in acquiring long-lived mature properties during the last six months. Range Resources' sale of non-core Appalachian properties will help the company finance exploitation of its Marcellus holdings.  

Like Range, Petrohawk and EOG's recent announcement to market over a billion dollars in non-core assets this year are further examples that the U.S. leading unconventional players should keep the deal pipeline full for 2010 as they look to fund unconventional drilling obligations through asset sales.  

In addition to ample supply - PLS anticipates that oil transactions should continue to grow in influence this year as buyers look to adjust their portfolio for more "profitable oil opportunities."  The second quarter 2010 has already seen SandRidge's $1.6 billion acquisition of Arena Resources, CCMP Capital's $345 million investment in Chaparral, Linn's $305 million acquisition of Permian assets and even Quantum Resource Management's $900 million acquisition of Denbury's non-core Encore (gas/oil) assets.  

Joint venture arrangements in unconventional plays figured prominently in U.S. deal volume, led by the Anadarko Petroleum Corporation and Mitsui E&P USA LLC $1.4 billion joint venture in the Marcellus Shale. The transaction provides Mitsui a 32.5% stake in Anadarko's Marcellus assets. The deal was valued at more than $14,000 per acre. Similarly, Chesapeake and Statoil expanded their joint venture arrangement in the Marcellus through a $253 million transaction, while BP broadened its participation in the Eagle Ford Shale with a $160 million JV with Lewis Energy Group.

During the 1st Quarter 2010, PLS and Derrick tallied 19 transactions representing $4.1 billion in volume in major U.S. unconventional oil and gas plays.

The Marcellus Shale attracted the most buyer interest with four transactions representing $2.0 billion in value for the period, including the Anadarko/Mitsui JV. Coalbed methane, much of it in Appalachia, also generated $1.1 billion in value in four separate unconventional transactions.

Acreage accounted for six of the 19 unconventional deals during the quarter, with five additional joint venture deals. Property-related transactions represented five deals while three involved corporate acquisitions.

PLS sees the Eagle Ford play possibly passing the Marcellus and Haynesville for market activity through the rest of the year as companies jockey for position in the U.S. hottest unconventional play including opportunities in the "oil window." As an example, Talisman announced earlier this morning that it would acquire Common Resources' Eagle Ford assets for $360 million. This number calculates out to record metrics of $9,700 per acre and/or $30,000 per flowing MCFe.  

"The market doesn't seem to be scared of $4.00 gas," said Ronyld W. Wise, Managing Director of PLS, Inc.

About the companies----

PLS, Inc. and Derrick Petroleum services are partners in providing U.S., Canadian and International clients leading Global and U.S. M&A and E&P databases and services. These databases are maintained 24/7 by a team of analysts and are accessible via the web to clients.

PLS, Inc. is a leading industry research and transactions firm based in Houston, Texas. PLS, Inc. provides clients with timely research, transaction, and financial advisory services.

Derrick Petroleum Services is an independent oil and gas research and consulting firm. Derrick's databases have worldwide coverage, with special emphasis on emerging plays and international transactions.

SOURCE PLS, Inc.

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