Last year had all of the markings of a boom year for energy mergers and acquisitions. Consulting firm Ernst & Young noted early in the year that stable oil prices and a recovering banking sector were key signals that suggested 2013 had the potential to produce a record number of energy M&A deals. Instead, 2013 was the worst year for energy M&A since 2008, with activity down by 49% from 2012. 

There were a few reasons why deal volumes were down last year. First, many producers had been using asset sales to fund drilling programs. However, in 2013 many of these companies started to scale back on drilling because the prices assets were fetching on the market didn't justify a sale. Natural gas prices were a prime example of this as fewer companies were willing to unload natural gas assets for a pittance in order to drill elsewhere. This is one reason we saw active sellers like Chesapeake Energy Corporation (CHKA.Q) unload just $3.6 billion worth of assets in 2013, which is down substantially from the more than $10 billion sold in 2012. One reason for this is that Chesapeake Energy really doesn't have much left to sell. That's in addition to its company's new management team, which is joining a growing trend within the industry to slash capital spending to align with cash flow.   

One hot area
That said, there were several notable deals in the energy space in 2013, led by $8.8 billion in M&A activity in the Eagle Ford Shale. Topping that list was Devon Energy Corp.'s (NYSE: DVN) $6 billion deal for privately held GeoSouthern Energy's assets in the play. Despite the high price tag, that deal was a real coup for Devon Energy, which acquired a real solid oil growth asset to add to its positions in the Permian Basin and Canadian oil sands. That deal helped to transition Devon Energy into a top oil stock. 

One Eagle Ford Shale deal that flew under the radar was Penn Virginia Corporation's (NYSE: PVA) $400 million acquisition to bolster its position in the oil-rich shale play. The deal included 19,000 net acres in the play, which boosted Penn Virginia's total position to 83,000 gross acres. It also boosted the company's drilling inventory by 345 locations to a total of 640 in the Eagle Ford Shale. 

This deal enhanced the scale of Penn Virginia, which it now expects to leverage in an effort to grow its oil production by 65%-85% in 2014. That's one reason some analysts think Penn Virginia could be the M&A name to watch in 2014.

Overall, oil deals were hot least year. Aside from the Eagle Ford, the Permian Basin and the Bakken Shale also saw billions in M&A volume. Deal volume totaled $7.5 in the Permian Basin and $5.5 billion in the Rockies, with the Bakken Shale seeing several notable deals.

Gas was not hot
One area that wasn't a hot commodity last year was natural gas. While several companies were looking to unload gas assets, these deals didn't bring many headlines because of the low prices the assets were fetching. That also brought total deal volume down as many companies simply didn't want to part with natural gas assets at depressed prices. That said, more headlines could be made later as the deals that were made eventually fuel profits for the buyers.

One example is the $288 million in natural gas assets that EXCO Resources, Inc. (NYSE: XCO) picked up from Chesapeake Energy. These assets are in EXCO Resources' core Haynesville shale and boosted the company's operated position in the play. That's in addition to increasing its future drilling locations in areas directly offsetting its current position. By picking up these assets at a depressed price from a distressed seller, EXCO Resources has the potential to turn this deal into a long-term win if gas prices improve. 

The same can be said for Southwestern Energy Company (SWN -0.14%) and EQT Corporation (EQT 0.03%). Both picked up natural gas assets from Chesapeake Energy for what seemed like pocket change. Southwestern Energy, for example, was able to double its acreage in the Marcellus Shale for a mere $93 million. Meanwhile, EQT paid just $113 million for its Marcellus acreage. What's interesting about that deal is that about 40% of the acreage EQT picked up was a throwaway in the deal as it wasn't going to be developed due to near-term lease expirations or a scattered footprint. However, in both cases these deals could turn out to be real steals as they increased the scale both companies have in core operating areas. 

Investor takeaway
Last year wasn't a boom for energy M&A. Low natural gas prices depressed deal volume and enthusiasm. However, there is something to be said for buying low, which is why these deals could make headlines in the future if natural gas prices pick up.