US M&A upstream value down 22% in 2008

US mergers and acquisitions (M&A) upstream transaction value declined to $38.1 billion in 2008 from $48.7 billion in 2007, according to the 2009 "Global Upstream M&A Review" prepared by IHS Herold Inc. and Harrison Lovegrove & Co.

Offshore staff

NORWALK, Connecticut -- US mergers and acquisitions (M&A) upstream transaction value declined to $38.1 billion in 2008 from $48.7 billion in 2007, according to the 2009 "Global Upstream M&A Review" prepared by IHS Herold Inc. and Harrison Lovegrove & Co. This review provides a comprehensive analysis of more than 280 significant upstream transactions that were announced in 2008, the companies say.

The report says the number of US transactions was on a record pace through just past mid-year 2008 and then declined dramatically during the rest of the year. More than 90 transactions were announced through July before commodity prices and equity markets tumbled and credit tightened. In the remaining five months of 2008, only 25 deals took place. The deal count sunk to a record low in the fourth quarter, historically one of the most active quarters for US upstream M&A. No US corporate transactions were announced in the fourth quarter.

Corporate consolidation was very limited for the second straight year, as Stone Energy's cash and stock takeover of Bois d'Arc Energy was the only significant corporate merger between two US publicly traded companies. Asset transaction value declined more than $10 billion, or 25%, from the record high in 2007, although it still reached the second highest level in ten years. However, the US still accounted for 37% of worldwide deal value, its highest percentage since 2004.

Weighted average proved reserves implied deal value soared to $19.11/boe in the second quarter and then retracted significantly in the second half along with oil and gas prices, according to the report. The average deal pricing for 2008 was a record $16.56/boe due to the strong first half performance.

Shale gas transactions accounted for over 35% of US deal value in 2008. Gas represented more than 70% of acquired proven reserves for the third consecutive year. The average reserve life of acquired properties (approximately 15 years) was the longest in the five-year study period.

03/17/2009

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