The global mergers and acquisitions (M&A) and raising activity in the upstream oil and gas sector totalled USD 130.5 billion in Q2 2019. This was a substantial increase from the USD 27.8 bn in Q1 2019. On the volume front, the number of deals decreased marginally from 316 in Q1 2019 to 315 in Q2 2019, according to GlobalData, a data and analytics company.
Praveen Kumar Karnati, Oil and Gas Analyst at GlobalData, comments, “A total of 107 M&A deals, with a combined value of USD 21.1 bn, were recorded in the conventional segment, and 44 deals, with a combined value of USD 62.3 bn, were recorded in the unconventional segment in Q2 2019.”
Capital raising, through equity offerings, witnessed a substantial increase in deal value, recording USD 13 bn in Q2 2019, compared with USD 1.5 bn in Q1 2019. The number of equity-offering deals also increased by 19% from 88 in Q1 2019 to 105 deals in Q2 2019.
Capital raising, through debt offerings, registered an increase of 48% in the number of deals and 62% in deal value with 49 deals, with a combined value of USD 28.8 bn, in Q2 2019, compared with 33 deals, with a combined value of USD 17.8 bn, in the previous quarter. In the upstream industry in Q2 2019, 10 private equity/venture capital deals, with a combined value of USD 5.3 bn, were recorded, compared with 16 deals, with a combined value of USD 1.3 bn, in Q1 2019.
Karnati continues, “The top M&A deal of Q2 2019 was Occidental Petroleum’s acquisition of Anadarko Petroleum for USD 55 bn, including the assumption of Anadarko’s debt. As of year-end 2018, the company had proven (1P) reserves of approximately 667 million barrels (mmbbl) of oil, 268 mmbbl of natural gas liquids (NGLs), and 3,230 billion cubic feet (bcf) of gas. In 2018, the company had production of approximately 140 mmbbl of oil, 38 mmbbl of NGLs, and 390 bcf of gas. The transaction implies values of USD 82,613.17 per boe of daily production and USD 37.33 per boe of 1P reserves.”
One of the top capital-raising deals of Q2 2019 was Occidental Petroleum’s agreement to issue 100,000 shares of cumulative perpetual preferred shares, at a price of USD 100,000 per share, to raise gross proceeds of USD 10 bn. The shares will be subscribed to by Berkshire Hathaway Inc. The preferred stock will accrue dividends at 8% per annum (or with respect to dividends that are accrued and unpaid, 9%).
Occidental Petroleum will also issue warrants to purchase up to 80 million shares of Occidental common stock at an exercise price of USD 62.5 per share. The warrant to be issued with the preferred stock may be exercised in whole or in part and from time to time, until 1 year after the redemption of the preferred stock. The placement is contingent upon Occidental entering and completing its proposed acquisition of Anadarko.