According to a recent report from Drilling Info, 2Q 2018 activity was low with only $8.7 billion in mergers and acquisitions compared to the quarterly average since 2009 of $17.8 billion.

Drilling Info believes this was partially due to investors’ incessant cry for positive cash flow, forcing many companies to become pure-play to achieve this outcome. E&P company’s divestments now total over $50 billion, according to the report.

Dramatic Increase in Upstream M&A Seen for H2 2018

Source: Drilling Info

The highest deal value and latest merger of 2Q 2018 was Ascent Resources acquisition of Hess Corporation (NYSE: HES), CNX Resources Corp. (NYSE: CNX), Utica Minerals Development, and an undisclosed seller’s property for a reported value of $1.5 billion. All of these assets are in the Utica play.

Dramatic Increase in Upstream M&A Seen for H2 2018

Source: Drilling Info

The survey noted one of the most noteworthy companies to execute upon a plan of divestment was BHP Billiton’s (NYSE: BBL) decision to exit U.S. shale in order to pursue global deepwater activity, and generate cash for its balance sheet. BHP’s divestment package includes assets in the Permian, Eagle Ford, Haynesville, and Fayetteville plays.

Initial bids for the package were due in early June and the final announcement from BHP is expected to come at year-end, according to BHP CEO Andrew McKensie.

A number of interested parties from private equity groups to multi-national corporations were reported to have been among the bidders. BP has been reported as the frontrunner with an offer of $10 billion or more.

Drilling Info believes the logjam in quality asset packages will begin to clear quickly in the second half of 2018 as the sub-$50 oil price risk is largely over.

Return to triple digit oil by 2020?

Not only does the sub-$50 oil risk appear to be over, in recent days analysts and some energy industry experts are looking at a real possibility for $100+ oil by 2020, based on country production declines in Venezuela, Angola, Nigeria and other areas, combined with a shortfall in international oilfield development during a period of growing international demand for oil.

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