1H-2011 Deal Watch. M&A deal flow reached $71 billion in 1H- 2011, down 20% compared to $88 billion in 1H-2010. Better results expected for full year 2011 with ~$50 billion worth of assets available for sale.

Quick Facts of 1H-2011 Vs 1H-2010

• 1H-2011 global M&A deal flow settled at $70.554 bil lion with 758 transactions against the 1H-2010 M&A deal flow of $88.319 billion with 753 transactions.

• Low M&A deal flow in 1H-2011 is attributed to the cancellation of the three significant deals worth $15 billion. The cancelled deals are- BP/Rosneft shares swap worth $7.8B; Novatek’s acquisition of 49% stake in Sibneftegaz for $1.3B; PetroChina/Encana Cutbank Ridge JV worth $5.5B
• Split of Asset and Corporate transactions- 62%/38% against 2010 split of 68%/32%. Corporate transactions have relatively increased inspite of the cancellation of the two big corporate deals-BP/Rosneft and Novatek/Sibneftegaz
• Conventional deal activity in US dropped to $9.5 billion (-113%) from 1H 2010 value of $20.3 billion, whereas unconventional activity remained the same with ~$17.5 billion.
• Permian Basin and Eagle Ford Shale deals led the conventional and unconventional areas with 31% and 35%, respectively.

Top 10 deals of 1H-2011 (by deal value)

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Active buyers of 2011

The study on the 2010 and 1H-2011 transactions says that Asian companies like CNOOC, PetroChina, Mitsui, KNOC and Marubeni are really keen on shelling out dollars on the North American shales. Looking ahead, Asian investors are expected to be the most active buyers in 2011, followed by the North American firms or other IOCs.

Deal activity by Country/Region in 1H-2011

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United States:

United States has contributed the maximum or 39% of  the total deal volume. It is observed that many new comers including BHP made an entry into to the US Shale market. In addition, Eagle Ford acreage metric has reached a new benchmark level of $20,000-$24,000/acre.

Following are the significant deals in US in 1H-2011:

• Chesapeake divests Fayetteville assets to BHP Billi ton for $4.8B
• Marathon acquires additional Eagle Ford acreage from Hilcorp and KKR for $3.5B
• KNOC and Anadarko form Eagle Ford JV ($1.6B)
• Chesapeake and CNOOC form Niobrara JV ($1.3B)
• SM Energy and Mitsui form Eagle Ford JV ($680M)
• Marubeni acquires 30% interest in Marathon's Niobrara acreage for $270M

Quick look at the metrics in US

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Canada:

Canada has contributed 10% of the total deal volume. It has been a busy year with respect to Montney shale formation. Much expected $5.4 billion deal of Petrochina acquiring 50% interest in Encana’s Cutbank Ridge assets was lapsed. However, Encana has again initiated a sale process regarding the same assets and few other unconventional assets in Canada.

Following are the significant deals in Canada in 1H-2011:

• Petronas and Progress Energy form Montney JV for $1.1B
• Talisman and Sasol expand Montney JV ($1B)

India

With very few deals, India has contributed 13% of the total deal volume. $7.2 billion alliance between BP and Reliance was the positive news for the entire E&P sector for India.

Following are the significant deals in India in 1H-2011:

• BP acquires 30% interest in 23 blocks in India from Reliance for $7.2B
• Petronas divests 14.9% stake in Cairn India to Vedanta and others for $2.1B

Africa:

Africa has contributed 12% of the total deal volume inspite of the political unrest that broke in the early 2011.

Following are the significant deals in Africa in 1H-2011:

• IPIC acquires remaining 52.94% stake in Cepsa for $5B
• Pioneer Natural Resources divests Tunisian assets to OMV for $866M
• HRT O&G acquires UNX Energy for $726M
• SPDC sells OML 30 to Conoil for $650M
• SPDC sells 45% stake in OML 42 to Kulczyk Oil led consortium for $600M

2011 Outlook

Although, 1H-2011 deal volume is relatively low when compared to 1H-2010, it is expected that the 2H-2011 will make up the year with approximately $50 billion worth of assets available for sale. There are few significant packages available from Encana, ConocoPhillips, Chesapeake, Apache, Eni and Nexen. The following interactive chart shows the top ten Deals in Play.

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Statistics of the upstream deals announced in 1H-2011

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Note: 1H-2011 M&A review is based on Derrick Petroleum Services’ Global E&P Transactions Database which includes information and analyses of all worldwide E&P transactions.