Mergers & Acquisitions Trends For The Energy and Industrial Sectors (Jan 2014)


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Wilcox Swartzwelder & Co have released the most recent data on notable merger and acquisition trends, deals and valuation in the energy and industrial sector.

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Mergers & Acquisitions Trends For The Energy and Industrial Sectors (Jan 2014)

  1. 1. Energy & Industrial Sector Observations  Barclays: Oil, Gas Companies to Spend 6% More in 14’. Global oil and gas companies will spend about $723 billion on exploration and production in 2014, an increase of 6.1% from 2013, Barclays Bank said in a report. For North America, Barclays forecast an increase of more than 7% in E&P spending in 2014, compared with a 2% increase in 2013, based on a survey of more than 300 oil and gas companies conducted last month. E&P companies are basing their spending budgets for the year on oil prices of $98 per barrel for Brent and $89 per barrel for West Texas Intermediate, and a benchmark U.S. natural gas price of $3.66 per British thermal unit, the bank said. (Reuters – December 9, 2013)  Fracking Boom Pushes U.S. Oil Output to 25-Year High. U.S. crude production rose to the highest level in a quarter-century as a shale drilling boom in states such as Texas and North Dakota cut the need for foreign oil and pushed the country closer to energy independence. The U.S. pumped 8.1 million barrels a day in the week ended Dec. 6, a gain of 0.8%, or 64,000 barrels a day, the Energy Information Administration said today. It’s the most since October 1988. U.S. oil output grew 18 percent in the past 12 months, the fastest pace on record, boosting fuel exports and reducing reliance on imports, according to the EIA. The boom will make the country the world’s largest producer by 2015, five years sooner than last year’s forecast, the International Energy Agency in Paris said last month. Domestic oil output will average 8.54 million barrels a day next year, according to the EIA, the statistical arm of the Energy Department. (New York Times – December 11, 2013  BHP Billiton’s Former Oil Chief Expects More U.S. M&A. BHP Billiton Ltd. (BHP)’s former oil and gas head J. Michael Yeager expects more industry mergers and acquisitions in the U.S. as onshore developers seek to sell assets they can’t develop and boost their technical skills. “There’s a lot of churn that’s going to go on and you will continue to see a lot of transactional work,” Yeager said today in a phone interview. “When you take these large amounts of acreage, you have to drill it up, or you have to give it up. In some cases you may have three years to drill as much as you can and you lose the rest of it, so there’s acreage that people cannot handle on the market. There’s a lot of opportunity.” Yeager said a need for more technical expertise will also drive companies to combine. (Bloomberg – November 7, 2013)  Demand to Export U.S. Crude Expected to Increase, Citigroup Report Predicts. Demand to export U.S. crude is poised to soar as the nation’s surging supply of hydrocarbons creates a glut of the feedstock, according to Citigroup Inc., the bank that predicted a slump in the nation’s imports. “The current crude glut on the U.S. Gulf Coast will continue to spark requests for crude oil export licenses and a positive but restricted response is inevitable,” Edward Morse, Citigroup’s New-York based head of commodities research said. “Applications for exports should start to soar.” (Bloomberg – November 12, 2013 Sector Update | January 2014 phone 972.831.1300 | web 102 Decker Court Suite 204 Irving, Texas 75062 972.831.1300
  2. 2. 2  New Data Shows ‘Meteoric’ Rise of Texas Oil. Oil production in Texas has hit its highest monthly rate on record, more than doubling in less than three years, according to new federal data. The state pumped 2.7 million barrels of crude per day during September, the highest average since monthly record-keeping began in January 1981. That marked a 30% jump over September 2012, according the U.S. Energy Information Administration. For 25 straight months, the state’s oil production rate has increased by more than 25% year-over-year. The E.I.A projects total U.S. oil production will rise to 8.2 million barrels per day in 2014. (Houston Chronicle – December 3, 2013  New Oil Boom Lurks in Denver – Julesburg Basin. Denver-based Whiting Petroleum sold its Texas holdings for $816 million in July and said it would use the cash to "accelerate" development of Colorado's Niobrara shale. "The one thing we don't have to worry about in the Niobrara is oil in place," James Brown, the company COO, told analysts in November. "There is a tremendous amount of oil in place." The discovery of an easy-to-drill and oil-rich stratum fueled nearly $4 billion in spending in 2013 by the top operators – who have plans to spend and drill even more in 2014. More than $1 billion is being spent on plants, pipelines and rail terminals to process and ship the oil. "We are still finding out how big this is going to be," said Dan Kelly, vice president at Noble Energy, the basin's largest operator. “The opportunity is there." Still, interviews with company executives and financial analysts and a review of corporate filings paint a picture of a resource so promising and profitable that it will continue to lure big investments. (Denver Post – December 15, 2013)  $14.5 Billion Cline Shale Impact. A new study estimates that the oil and gas industry had a $14.5 billion impact last year on the Cline Shale region, east of the traditionally busier drilling area of the Permian Basin. The University of Texas at San Antonio’s Institute for Economic Development found the industry supported 21,450 jobs, with $1 billion in salaries and benefits to workers last year. “We expect to see that continue,” said Thomas Tunstall, research director with the Institute for Economic Development. (San Antonio Express – December 20, 2013) Broader Middle Market M&A Trends Historical M&A Volume 6,000 5,000 Transaction Valuations (Completed Deals < $500 Million) 10.0x 10 Year Avg. = 3,771 8.0x (EBITDA Multiple; Completed Deals<$500 Million) 9.4x 9.2x 8.5x 8.4x 8.4x 8.2x 7.9x 7.4x 7.4x 7.1x 7.0x 4,000 6.0x 3,000 4.0x 2,000 2.0x 1,000 0.0x 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM Sector Update | January 2014 phone 972.831.1300 | web
  3. 3. 3 Energy Stock Price Performance U.S. Rig Count 2,250 90.0% 2,000 80.0% 1,750 70.0% 1,500 60.0% 1,250 50.0% 1,000 40.0% 750 30.0% 500 20.0% 250 10.0% 0 Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13 Oil Gas % Oil (As of January 6, 2014) Red – New York Stock Exchange Composite Blue – Oilfield Services Index Green – Exploration & Production Basin Permian Eagle Ford Williston Industrial Stock Price Performance Rig Count 468 228 185 YoY Rig Change -5 -5 -9 % Change -1% -2% -5% U.S. Industrial Manufacturing (ISM) 75.0 70.0 65.0 60.0 55.0 PMI 50.0 45.0 40.0 35.0 30.0 25.0 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 (As of January 2, 2014) Red – New York Stock Exchange Composite Blue – Industrial and Infrastructure Sector Update | January 2014 phone 972.831.1300 | web Oct-13 Nov-13 Dec-13 PMI 56.4 57.3 57.0 0.0%
  4. 4. 4 Notable Energy & Industrial Transactions Announcement Date Acquiror Target Target/Transaction Description Transaction Value ($M) Energy & Industrial Manufacturing and Services 1/3/14 Enterprise Group Hart Oilfield Rentals Provider of site services and equipment rentals, such as wellsite trailers, medical facilities, fire suppression systems and scaffolding $21.2 $285.0 1/2/14 DXP Enterprises B27/Champlain Capital Texas-based supplier of pump & integrated flow control solutions to the oil & gas and power generation industry 1/2/14 Applied Industrial Technologies Texas Oilpatch Services Texas-based distributor of bearings, oil seals, power transmission products and other replacement parts for use in mud pumps, swivels, draw works and rotary tables -- Berkshire Hathaway Phillips Specialty Products Texas-based provider of chemicals that serve as drag reduction agents to maximize the flow potential of pipelines -- -- 12/30/13 12/26/13 Energy Capital Partners NESCO/Platinum Equity Indiana-based provider of fleet equipment rental, sales and services 12/24/13 Aveda Transportation and Energy Services M&K Hotshot & Trucking/M&K Rig Services Provider of oilfield hauling services and equipment rentals with a fleet of 79 trailers, 15 conventional tractors, 14 winch trucks, 3 cranes and 395 pieces of rental equipment $40.0 Kohlberg Kravis Roberts Torq Energy Logistics Capital commitment to fund an acquisition strategy that augments Torq’s six transloading terminals and transportation services $240.0 First Reserve Dixie Electric 12/24/13 12/19/13 12/9/13 Kentz Corp., Ltd. Provider of electrical infrastructure and automation services from initial development throughout the life of an oilfield, including ongoing infrastructure upgrades and maintenance Valerus Field Solutions Acquisition of the field solutions portion of Valerus including the processing and treating, production equipment, compression and integrated service business lines -- $435.0 12/9/13 Arsenal Capital Partners Flowchem Provider of specialty chemical solutions, such as drag reducing additives to the pipeline industry -- 12/4/13 Windjammer Capital Engineered Controls International Designer and manufacturer of flow control valves & regulators used in transportation, delivery and storage of LPG, LNG and industrial gases -- Quality Connector Systems, LLC Texas-based manufacturer of proprietary deep and shallow water pipeline connectors for subsea pipeline construction, repair and expansion projects -- 12/3/13 Oil States International Sector Update | January 2014 phone 972.831.1300 | web
  5. 5. 5 Notable Energy & Industrial Transactions (Cont’d) Announcement Date Acquiror Target Target/Transaction Description Transaction Value ($M) Energy & Industrial Manufacturing and Services (Cont’d) 11/21/13 11/20/13 SCF Partners Oil Patch Group Texas-based provider of accommodation & support, drill pipe & tubular rental and production testing and flow back services -- Wyoming-based operator of 24 well service rigs and 1 plugging/cementing unit. Combined, the companies will have 100+ well service rigs -- Beckman Production Services/SCF Partners Northern Production Inspection Oilfield Services/Calvert Street Capital Oilfield Tubular Inspection Oklahoma-based provider of mobile inspection, testing and cleaning services of OCTG and drill tools -- Aquilex HydroChem/ Centerbridge Partners Inland Industrial Services Group/ Strength Capital Texas-based provider of industrial cleaning solutions to the refining, chemical, power and other industrial markets -- Integral Oilfield Services/OFS Energy Fund ODS International Texas-based provider of engineered drilling equipment and associated inspection & maintenance services to the offshore industry -- Hammond Kennedy Whitney TC Companies/ EnerSafe Merger of TC Companies and EnerSafe which as a combined company provides safety services and products, including H2S safety packages, flaring technologies and safety consulting services -- 11/5/13 BEC Acquisition/Mill City Capital Bonnett’s Energy Corp. Provides wireline services, production testing services and rental, fishing & pipe recovery services $110.0 11/4/13 Innospec Bachman Services Provider of chemical products and services used by the drilling, fracturing and production segments 11/4/13 BE Aerospace Blue Dot Energy Services/LongueVue Capital Provider of rental equipment and fishing tools and related services to the Marcellus and Utica Shale Antelope Oil Tool & Manufacturing/ Intervale Capital WearSox Manufacturer of thermal spray-on casing centralizers, stabilizers and stop collars for cementation and casingwhile drilling applications for the offshore industry -- Quanta Services T.G. Mercer Consulting Services/ Performance Energy Services Provider of pipe transportation, handling, storage and logistics management services to the pipeline construction industry; Performance Energy is a provider of steel structure fabrication, mechanical installations, electrical & instrumentation services and maintenance & repair for the offshore industry -- 11/20/13 11/18/13 11/7/13 11/6/13 11/4/13 10/31/13 Sector Update | January 2014 phone 972.831.1300 | web -- $75.0
  6. 6. 6 Notable Exploration & Production and Midstream/Downstream Transactions Announcement Date Acquiror Target Target/Transaction Description Transaction Value ($M) Exploration & Production and Midstream/Downstream 12/31/13 BreitBurn Energy Partners CrownRock LP Acquisition of assets located in the Permian Basin that produce 2,900 Boep/d, 60% of which is oil $302.0 12/30/13 SM Energy EnerVest, Ltd. Acquisition of assets located in the Anadarko Basin that produce 8,500 Boep/d, 75% of which is natural gas $329.0 12/30/13 Vanguard Natural Resources Undisclosed seller Acquisition of assets located in Southwestern Wyoming that consist of 87,000 gross acres, producing 113.4 MMcfe/d, 80% of which is natural gas $580.0 Eagle Rock Energy Partners Regency Energy Partners Consideration from Eagle Rock for the MLP that specializes in gathering and processing, contract compression, contract treating, transportation, fractionation and storage of natural gas and natural gas liquids $1,325.0 Kinder Morgan American Petroleum Tankers/State Class Tankers/Blackstone Group/Cerberus Capital Mgmt. Providers of marine transportation of crude oil, condensate and refined products with a fleet that consists of five medium range product tankers each with 333,000 barrels of cargo capacity and the commission of five new tankers of the same size $962.0 12/23/13 12/23/13 12/20/13 Peregrine Petroleum Primary Natural Resources Acquisition of 35 wells and non-operated interests in 31 wells located in the Anadarko Basin -- 12/20/13 Cabot Oil & Gas Chaparral Energy Acquisition of assets located in the Texas and Oklahoma Panhandle $160.1 12/20/13 Natural Resource Partners Sundance Energy Acquisition of assets located in North Dakota that consists of 100 wells either producing or in various stages of development $33.7 Chief Oil & Gas of Dallas/Enerplus/Tug Hill Chesapeake Energy Acquisition of assets located in the Marcellus Shale that consist of 75,000 acres, 40 operated wells and production of 130 MMcf/d $500.0 12/19/13 Jones Energy Sabine Oil & Gas Acquisition of assets located in Texas Pandhandle and western Oklahoma that consist of 26,000 net acres $195.0 12/16/13 Black Ridge Oil & Gas Undisclosed seller Acquisition of assets located in the Williston Basin consisting of an undisclosed amount of wells and acreage $20.6 12/12/13 EnerVest, Ltd. Bill Barrett Corp. Acquisition of natural gas properties located in the Uinta Basin in Utah $369.0 12/11/13 QEP Resources EnerVest, Ltd. Acquisition of properties located in the Permian Basin that consist of 6,700 Boep/d, 68% of which is crude, and 47 MMBoe of proved reserves $950.0 12/19/13 12/9/13 Undisclosed buyer Cabot Oil & Gas Sale of non-core properties located in the Mid-Continent that consist of production of 15 MMcfe/d $123.0 12/8/13 Undisclosed buyer Abraxas Petroleum Sale of assets located in the Eagle Ford that consist of 1,200 net acres, 3.7 MMBoe of proved reserves and production of 655 Boep/d $73.0 Sector Update | January 2014 phone 972.831.1300 | web
  7. 7. 7 Notable Exploration & Production and Midstream/Downstream Transactions (Cont’d) Announcement Date Acquiror Target Target/Transaction Description Transaction Value ($M) Exploration & Production and Midstream/Downstream (Cont’d) 11/26/13 Templar Energy/Le Norman Operating Forest Oil Corp. 11/26/13 Eagle Energy 11/25/13 11/21/13 11/20/13 11/20/13 With the acquisition of acres located in the Texas Panhandle, Templar and Le Norman Operating will produce in excess of 20,000 net Boep/d with an estimated proved reserve base of net 145 MMBoe $944.0 Undisclosed seller Acquisition of petroleum producing properties located in Hardeman County, TX $26.3 Miller Energy Resources Undisclosed seller Acquisition of the North Fork Unit and natural gas fields located in Alaska $65.0 Comstock Resources Ursa Resources Group/Denham Capital Acquisition of one well producing 433 Boep/d and 20,000 net acres located in the Eagle Ford $66.5 Lakewood Midstream/Energy Spectrum BS&W Solutions/ West OK Disposal/ West OK Trucking BS&W Solutions purchases and processes oil with high water or sediment content and sells recovered oil; West OK Disposal provides oilfield waste fluid handling and disposal; West OK Trucking provides transport services Devon Energy GeoSouthern Acquisition of Eagle Ford assets that include 53,000 Boep/d of current production, 82,000 net acres, 1,200 undrilled locations and 400 MMBoe of risked recoverable reserves, the majority of which are proved reserves $6,000.0 $172.4 -- 11/15/13 Gastar Exploration Lime Rock Resources Acquisition of Midcontinent assets that include a 80.5% net revenue interest in 24,000 acres 11/8/13 Progress Energy Talisman Energy Acquisition of Canadian assets that include 127,000 net acres and will add 11,000 Boep/d to its production 11/7/13 Carrizo Oil & Gas Avista Capital Acquisition of assets located in the Utica Shale that include 5,900 net acres $73.0 11/7/13 Riverstone Holdings/Oakmont Corp. Liberty Resources Liberty Resources is a new energy platform focused on undeveloped resources in the DJ Basin, Permian Basin and Powder River Basin with private equity commitments from both Riverstone and Oakmont Corp. $350.0 NGL Energy Partners Gavilon, LLC Acquisition of the midstream company that operates integrated crude oil storage, terminal and pipeline assets located in Oklahoma, Texas and Louisiana $890.0 11/6/13 Sector Update | January 2014 phone 972.831.1300 | web $1,430.0
  8. 8. 8 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,, 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 Copyright © 2014 Wilcox Swartzwelder & Co. LLC, all rights reserved. Sector Update | January 2014 phone 972.831.1300 | web