Upstream M&A Falls to $12 Billion in a Volatile Market

CALGARY, Alberta, July 14, 2022 /PRNewswire/ -- Enverus Intelligence Research (EIR), a subsidiary of Enverus, the leading energy data analytics and SaaS technology company, is releasing its summary of 2Q22 upstream M&A. Overall, Q2 was a challenging quarter for negotiating deals as volatility roiled both commodity and equity markets. Despite that, about $12 billion was transacted in upstream M&A as numerous private equity (PE) firms brought their investments to market looking to cash in on high oil and gas prices.

"As anticipated, the spike in commodity prices that followed Russia's invasion of Ukraine temporarily stalled M&A as buyers and sellers disagreed on the value of assets," said Andrew Dittmar, director at Enverus Intelligence Research. "High prices, though, also encouraged a rush by PE firms to test the waters for M&A. While not everyone that is going into the market is getting what they deem to be a suitable offer, enough are to drive modestly active upstream M&A."

About one-third of the quarter's total deal value came from a merger of equals between private Colgate Energy Partners III, which is focused on the Delaware Basin part of the Permian, and public Centennial Resource Development.

"Public equity markets are retaining a multi-year trend of being essentially closed for private E&Ps to launch a traditional IPO," added Dittmar. "That leaves M&A as the main exit route. There is appetite on the public company side to buy out private E&Ps, but public companies need to keep the valuation paid on these deals in line or less than where the market is pricing their own stock."

One way for public companies to get more deals done is to increase the use of relatively cheap debt financing in M&A. In recent weeks, there has been an uptick in the use of debt to pay for deals. Provided banks continue to be willing to lend and E&Ps willing to borrow, this has the potential to fuel further deals.

"Looking forward I don't think we will see any shortage of assets available for sale by private equity firms across every major shale play," concluded Dittmar.

About Enverus

Enverus is the leading energy SaaS company delivering highly-technical insights and predictive/prescriptive analytics that empower customers to make decisions that increase profit. Enverus' innovative technologies drive production and investment strategies, enable best practices for energy and commodity trading and risk management, and reduce costs through automated processes across critical business functions. Enverus is a strategic partner to more than 6,000 customers in 50 countries. Learn more at Enverus.com.

About Enverus Intelligence Research

Enverus Intelligence Research, Inc. is a subsidiary of Enverus and publishes energy-sector research that focuses on the oil and natural gas industries and broader energy topics including publicly traded and privately held oil, gas, midstream and other energy industry companies, basin studies (including characteristics, activity, infrastructure, etc.), commodity pricing forecasts, global macroeconomics and geopolitical matters.  Enverus Intelligence Research, Inc. is registered with the U.S. Securities and Exchange Commission as an investment adviser.

SOURCE Enverus