AUSTIN, Texas, April 8, 2021 /PRNewswire/ -- Enverus, the leading energy SaaS company, has released its summary of 1Q21 U.S. upstream M&A activity. The report shows $3.4 billion in deal value was transacted — an 88% decline from 4Q20. This is the third year in a row U.S. activity has started slow.
Q1 deal activity largely focused on production-heavy assets in legacy oil plays. Combined, the Bakken and Eagle Ford accounted for two-thirds of deal value. A strong rally in crude oil prices improving cash flow from these more developed areas likely helped spur the additional buyer interest.
Another distinguishing factor of Q1 activity was involvement by private equity. The top two deals of the quarter were acquisitions by private equity-sponsored E&Ps: Grayson Mill Energy's $900 million buy in the Bakken and Validus Energy's $880 million Eagle Ford purchase. The next two largest deals were sales by Bruin E&P (formerly private equity-backed and then owned by creditors following a bankruptcy reorganization) and Grenadier Energy Partners II, which was sponsored by EnCap and Kayne Anderson. Then, the first day of Q2 opened with a sale by Permian-focused DoublePoint Energy, which has at least four private sponsors, to Pioneer in the largest acquisition of a private E&P in a decade.
"After most of 2020's activity was dominated by mergers between public companies, we are seeing private equity play a more prominent role in M&A markets in 2021," said Andrew Dittmar, M&A analyst at Enverus. "Following years of heavy investment in unconventional resources, private E&Ps were having a challenging time finding exits either through sales or IPOs and had consequently tamped back spending on new deals. Now, in December 2020 and continuing into 2021, we have seen several prominent exits plus new investments from the private side of the industry."
"Going forward, private equity should continue to play an important role in upstream M&A both on the acquisition side targeting legacy areas that are being sold as public companies narrow their focus and as potential targets for public companies to buy using their now higher-priced stock as payment like Pioneer did to buy DoublePoint," added Dittmar. "Consolidating additional private companies will also help address concerns that a ramp up in rigs on the private side might again send crude markets into oversupplied territory. Pioneer already announced plans to reduce DoublePoint's seven rigs to five by the end of the year."
Through its SaaS platform, Enverus is the leading data, software and insights company providing innovative technologies and predictive/prescriptive analytics, empowering customers to navigate the future. Enverus' solutions deliver value to more than 6,000 customers in 50 countries across the upstream, midstream and downstream sectors, enabling the industry to be more collaborative, efficient and competitive. Enverus is a portfolio company of Genstar Capital. Creating the future of energy together. Learn more at www.enverus.com.
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