New report reveals rise in midstream M&A in Q1 2015

Trans-Alaska Oil Pipeline Copyright Alberto LoyoGlobalData’s midstream analytics include details on global planned active and inactive pipelines, oil and chemicals storage, gas storage, gas processing, and LNG regasification and liquefaction plants. (Image source: Alberto Loyo/Shutterstock)Midstream oil and gas deals activity, including capital markets and mergers and acquisitions (M&A), increased globally from 129 transactions in Q4 2014 to 139 in Q1 2015, says research and consulting firm GlobalData

According to the company’s latest quarterly midstream deals review, M&A accounted for 23 per cent and 38 per cent of the total number of midstream deals and deal value in Q1 2015 respectively with 32 transactions totalling US$30.7bn.

However, this value represents a 35 per cent decrease from the US$47.4bn acquired from the same number of transactions in Q4 2014.

GlobalData head of Oil & Gas Research and Consulting Matthew Jurecky said that the Americas remained the regional frontrunner in terms of M&A and asset transactions in Q1 2015, with a total value of US$31.1bn from 38 deals.

Jurecky added, “The midstream sector’s top deal in Q1 2015 was Energy Transfer Partners’ agreement to merge with Regency Energy Partners to form one of the industry’s largest partnerships. In addition to expected cost savings of more than US$160mn per year, the revenues generated from incremental gathering and processing volumes will help counter lower commodity prices.

“As evident in Kinder Morgan’s acquisition of Hiland last quarter, access to upside from some of the Lower 48’s most resilient plays, such as the Marcellus, Eagle Ford and West Texas, is driving deals. Capital spending and development is most sensitive to upside from improved economics through a price rebound or otherwise.”

GlobalData’s report revealed that there were 20 asset transactions reported globally in the midstream sector in Q1 2015, down from 25 in Q4 2014. However, the total value for these deals doubled from US$1.8bn to US$3.6bn during this period.

Similarly, both capital-raising through the debt market and financing through private equity and venture capital registered significant increases in value between Q4 2014 and Q1 2015.

Jurecky continued, “Nine companies issued more than US$10bn in debt last quarter led by Williams, with US$4.5bn, followed by Energy Transfer Partners and Kinder Morgan, with US$3bn and US$2.5bn, respectively.

“Activity is now above Q1 2014 levels, after a low in Q3 2014 prior to the oil price crash. As the tougher business environment has led to constrained cash flow, capital is sought in the debt market to fund ongoing capital programs and repay other obligations.”

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