2013 Oil and Gas M&A Year in Review - Themes and Deal Points

March 12, 2014

Recently, our firm’s Calgary office completed a review of M&A themes and deal terms in the oil and gas sector for 2013. This study contains a list of oil and gas M&A transactions over the last year, a review of key trends in deal terms, a summary of notable features of each transaction, an analysis of the timelines and a numerical analysis of key deal terms.

 
A few key themes emerged from our review:

The year started slowly with nine deals announced in H1. The market announced 10 deals in H2, trailing the equity uptick that occurred in the last half of the year by some distance. This made for a long 12 months for public equity holders, management, employees and advisors. The landscape in 2013 was dominated by privatizations, financial buyers, service deals and very small transactions. Domestic and international strategic buyers were absent from the market and were responsible for the dramatic decline in activity. The highlights were colourful, but somewhat downbeat.

  • There was a steep decline in M&A activity involving public targets. In 2012, 30 deals were completed or announced.
     
  • In 2013, only 19 made the cut.
     
  • Large deals have completely vanished and transaction values have plummeted. In 2013, the largest deal in our survey was worth $935 million, while in 2012 the largest deal tipped the scales at over $18 billion.
     
  • The total value of deals in 2013 was $2.4 billion - only 6.3% of the total value of deals announced in 2012. Half of all of the deals of 2013 were worth less than $50 million.
     
  • In 2013, 12 deals were completed by strategics, and seven were completed by financials. Financials did only two deals in 2012.
     
  • 73% of deals (by number) in 2013 involved E&P targets and 17% involved service companies. There were no midstream transactions.
     
  • In 2013 there were seven deals (or 36% of the total) that involved acquisitions of targets by large shareholders or management, an unusually large proportion of the total number of deals. In 2012, only one deal was initiated by management or a large shareholder.
     
  • Poland entered the Canadian industry through two deals, with Kulczyk Oil’s acquisition of Winstar Resources and ORLEN Upstream’s acquisition of TriOil Resources. Asia Pacific was quiet on the corporate front, with only one deal – Yanchang Petroleum acquired Novus Energy.
     
  • Novel structures were used in the acquisitions of Winstar Resources (by Kulczyk Oil), RIA Resources (by Qwest Contrarian Fund) and Wenzel Downhole (by Basin Tools). Both the acquisitions of Bonnetts Energy (by Mill City Capital) and Zedi (by 1779958 Alberta Ltd.) involved management rolling over its equity. Buyers did not shy from creativity.
     
  • There was no topping or contested activity in 2013 that reached the level of public disclosure.
     
  • Two complex corporate stories – Compton and Wenzel Downhole – came to an end as public entities.

This survey does not cover private M&A activity (both corporate and asset), or joint ventures and asset sales by public companies, which remained fairly strong, fueled by big company rationalization and new equity funding. Public shareholders are not at the party, but the good times continue to roll for some players.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.

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