m&a trends for the energy industry november 2014
DESCRIPTION
Merger & Acquistion Trends for the US energy sector, with a focus on middle market deals in the oil & gas industry. Brought to you by Wilcox, Swartzwelder & Co., a leading energy investment bank located in Dallas, TX.TRANSCRIPT
Sector Update | November 2014
phone 972.831.1300 | web WS-iBank.com
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1,000
2,000
3,000
4,000
5,000
6,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM
Historical M&A Volume (Completed Deals < $500 Million)
10 Year Avg. = 3,715 7.9x
9.4x
8.4x 9.2x
8.4x
7.1x 7.4x
8.5x
7.4x 8.2x 8.4x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM
Transaction Valuations (EBITDA Multiple; Completed Deals<$500 Million)
Energy & Industrial Sector Observations
PwC: U.S. Oil & Gas Deal Value Hits Ten Year High. “Third quarter deal value reached a 10 year high value due to a number of drivers coming together to bolster M&A flow, including the significant impact of $1 billion-plus deals, foreign and private equity interest and the attractiveness of shale plays,” said Doug Meier, PwC’s US Energy Sector Deals leader. “This extraordinary deal activity occurred while commodity prices declined sharply during the quarter – a trend that accelerated in the first half of October. If we continue to see a sustained lower crude pricing environment, we will likely witness an acceleration of the portfolio restructuring efforts we’ve been seeing in the past couple of quarters as companies focus on the importance of financial discipline.” (PricewaterhouseCoopers – October 29, 2014)
Bloomberg: Energy Execs Not Worried About $80 Oil. Amid predictions that the biggest drop in crude prices since the global financial crisis six years ago will choke off cash flow and slow drilling, industry leaders are reassuring investors they still have the means to return ample profits. Improved technology is bringing down costs and most shale producers operate in multiple basins, allowing them to shift work to the most profitable sites. ‘‘If it floats between $80 and $100, our sector will be fine,’’ said David Lesar, Chairman and CEO of Halliburton. ‘‘That’s a range that the service industry and our customers can easily live within.” On average, Eagle Ford oil producers need prices around $68 a barrel to make drilling worthwhile, according to ITG Investment Research, a New York-based investment research and brokerage firm. In the Bakken and Permian formations, break-even prices are $67 and $65, respectively. (Bloomberg – October 28, 2014)
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Irving, Texas 75062
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Broader Middle Market M&A Trends
2
Sector Update | November 2014
phone 972.831.1300 | web WS-iBank.com
Energy Stock Price Performance
Red – New York Stock Exchange Composite Blue – Oilfield Services Index Green – Exploration & Production
U.S. Rig Count
(As of October 31, 2014)
Industrial Stock Price Performance
Red – New York Stock Exchange Composite Blue – Industrial and Infrastructure
U.S. Industrial Manufacturing (ISM)
(As of November 1, 2014)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14
Oil Gas % Oil
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
70.0
75.0
Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14
PM
I
Aug-14 Sep-14 Oct-14
PMI 59.0 56.6 59.0
Basin
Rig
Count
YoY Rig
Change
%
Change
Permian 562 111 25%
Eagle Ford 218 -8 -4%
Williston 192 17 10%
3
Sector Update | November 2014
phone 972.831.1300 | web WS-iBank.com
Notable Energy & Industrial Transactions
Announce-ment Date
Acquiror Target Target/Transaction Description Transaction Value ($M)
Energy & Industrial Manufacturing and Services
10/24/14 Apollo Global Management
Express Energy Services
Texas-based provider of casing & tubular running, rathole drilling, drill site rental, well testing, wireline and well intervention services
--
10/24/14 Abaco Energy/ Riverstone Holdings
Basin Tools Texas-based manufacturer and servicer of rotors and stators used in the mud motor power industry --
10/23/14 Riverstone Holdings Proserv Group/ Intervale Capital
With 2,200+ employees and operations in 11 countries, Proserv provides equipment and services to the offshore industry including drilling control systems, production equipment & systems, topside & subsea IRM services
--
10/22/14 Recapture Solutions/ Intervale Capital
Flex Leasing Power & Services
Executive lessor of Flex Turbines (operate using wellhead gas to provide remote electricity) for oilfield applications in the DJ, Eagle Ford, Permian & Williston Basins
--
10/17/14 Eagle Materials CRS Proppants/ Eos
Oklahoma-based provider of Northern White frac sand to the Eagle Ford, Granite Wash, Permian and Woodford $225.0
10/15/14 IronGate Energy Services/ Clearlake Capital
Sun Tubular Services Texas-based provider of workstring rental services to Permian Basin E&P operators --
10/10/14 Oilfield Water Logistics/ Natural Gas Partners
GP II Energy Acquisition of three saltwater disposal wells & pipeline infrastructure located in the Permian Basin --
10/10/14 Milford Companies LineQuest
Texas-based provider of line locating, mapping and hydro excavation services to the Permian Basin --
10/7/14 Banyan Investment Partners
Waples Manufacturing/ Southlake Equity
Texas-based manufacturer of machined components (hydraulic fracturing pump & tank equipment, cementing equipment, tooling, plunger lift systems)
--
10/7/14 Team Oil Tools/ Intervale Capital
Schlehuber Oil Tools Texas-based provider of completion tools (packers, bridge plugs, tubing anchors) and fishing and rental services --
10/2/14 Dover Corp. Accelerated Companies/ White Deer Energy
Texas-based provider of artificial lift equipment (electric submersible pump systems, hydraulic lift systems, gas lift systems & surface pumps) and modular process systems with 500+ employees and 30 U.S. locations
$430.0
10/2/14 WadeCo Specialties/ Hastings Equity
Elite Treating Solutions
Provider of production chemicals and related services to the Permian Basin --
10/1/14 Innospec Independence Oilfield Chemicals/ CSL Capital
Texas-based provider of completion, stimulation and production chemicals for the Eagle Ford, Bakken, Barnett, Niobara and Marcellus Basins
$228.0
10/1/14 WS Atkins Houston Offshore Engineering
Provider of offshore design engineering services with specialist experience in floating production platforms $73.0
10/1/14 Trinity Hunt Miller Environmental Services
Recapitalization for provider of industrial and environmental services including vacuum truck, tank cleaning, vapor control, hydroblasting and related services
--
4
Sector Update | November 2014
phone 972.831.1300 | web WS-iBank.com
Notable Exploration & Production and Midstream/Downstream Transactions
Announce-ment Date
Acquiror Target Target/Transaction Description Transaction Value ($M)
Exploration & Production and Midstream/Downstream 10/23/14 Juneau Energy, LLC Undisclosed seller Acquisition of assets located in East Texas consisting of
20,800 acres --
10/20/14 Tesoro Logistics, LP QEP Resources Inc. Acquisition of assets including QEP Field Services, LLC, a natural gas gathering and processing business, and QEP Midstream Partners
$2,500.0
10/17/14 Southwestern Energy Co.
Chesapeake Energy Corp.
Acquisition of assets located in West Virginia and Pennsylvania consisting of 256 operating and producing horizontal wells with production of 336 MMcfe/d and 179 non-operated horizontal wells
$5,375.0
10/16/14 Mountaineer Keystone Energy, LLC
PDC Mountaineer, LLC
Acquisition of assets located in West Virginia consisting of 131,000 acres, 65% of which is held-by-production $500.0
10/15/14 American Midstream Partners, LP
Costar Midstream, LLC
Acquisition of company with onshore gathering and processing operations in East Texas and the Permian Basin with a crude oil gathering system project underway in the Bakken
$470.0
10/14/14 Targa Resources Corp.
Atlas Energy, LP Acquisition of assets located in the Mississippi Lime, Eagle Ford and Okalahoma’s SCOOP plays including a natural gas liquid processing and transportation facility anchored by a Gulf Coats export terminal
$5,900.0
10/13/14 Mid-Con Energy Partners
Undisclosed seller Acquisition of assets located in the Permian Basin consisting of 6.1 MMBoe in reserves and 18,000 acres $120.0
10/9/14 Callon Petroleum Co. Undisclosed seller Acquisition of assets located in the Permian Basin consisting of 6,230 acres $205.0
10/7/14 Natural Resource Partners, LP
Kaiser-Francis Oil Co. Acquisition of assets located in the Bakken consisting of 5,700 acres, production of 3,100 Boe/d and 186 producing wells with 10 wells in development
$340.0
10/6/14 KKR Natural Resources/ Fleur de Lis Energy
LINN Energy, LLC Acquisition of assets located in Permian Basin consisting of 7,200 acres and production of 5,200 Boe/d $350.0
10/3/14 FourPoint Energy, LLC/ EnerVest, Ltd.
LINN Energy, LLC Acquisition of assets located in Western Anadarko Basin consisting of interest in 1,358 wells, 145,000 acres, production of 195 MMcfe/d, an additional midstream asset with more than 170 miles of gas gathering and compression systems and an oil terminal facility
$1,950.0
5
Sector Update | November 2014
phone 972.831.1300 | web WS-iBank.com
Wilcox | Swartzwelder & Co.
Wilcox Swartzwelder & Co. is a boutique investment bank, specialized in delivering high quality financial advice exclusively to owners of middle market companies and oil and gas properties in the energy and industrial sector.
Advisory services include company sales, mergers and acquisitions, private placements of debt and equity, oil and gas property acquisitions and divestitures, institutional capital raises, and general corporate finance matters. Through its merchant funding activities, the Firm acts as direct investor providing flexible capital to support small, entrepreneurial companies.
Principals have more than 40 years of combined investment banking experience, closing over 100 transactions with an aggregate value in excess of $3.9 billion. They have also acted as investors with capital at risk, operators and board members in multiple companies, having navigated through various business cycles and completed transactions in both up and down markets.
The Firm is fully licensed and registered. Securities are offered through PetroGrowth Energy Advisors, LLC, a registered broker-dealer and member of FINRA/SIPC.
Notes:
The information and views contained in this report were prepared by Wilcox Swartzwelder & Co. LLC and should not be construed as an offer to buy or sell or a solicitation to buy or sell any financial instruments or to participate in any trading strategy. The information contained herein is believed to be reliable, but Wilcox Swartzwelder & Co. LLC makes no representation as to its accuracy or completeness.
Indices: Dow Jones U.S. Select Oil Equipment and Services Index (DJSOES), Dow Jones U.S. Select Oil Exploration and Production (DJSOEP), Industrial Select Sector SPDR (XLI), NYSE Composite Index (NYA)
Data Sources: Dealogic, Capital IQ, Stockcharts.com, Baker Hughes, RigData, Rig Zone, Energy Information Agency (EIA), Association of Energy Service Companies (AESC), Institute of Supply Management (ISM), Wilcox Swartzwelder Proprietary Energy and Industrial M&A Database
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