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The collapse in oil prices over the last year has led to significant changes in the E&P landscape in the U.S., but perhaps not in the ways that many observers initially expected.
Earlier this year, many analysts expected more financial distress and even bankruptcy for a number of oil and gas firms. So far, the collateral damage has been limited. This is probably a result of a combination of strong hedge price protection for producers and rapid supply chain deflation. Of course financial distress is often gradual, and the benefits of hedges are starting to expire for many firms at this point. Given this, investors are surely in for a volatile road in the energy sector over the next year.
The surprising relative stability in the sector over the last six months does not mean that nothing has changed. Instead, many companies have been shifting their positions in response to the price environment and their own specific balance sheet needs. Some of the most significant and biggest deals for shareholders since the price collapse are:
1. Noble's purchase of Rosetta Resources: Noble Energy's (NYSE:NBL) $2.1 billion all-stock buyout of Rosetta provides a model for future acquisitions that other companies may follow when looking at distressed stock deals.
2. Pioneer's asset sale to Enterprise Products Partners: In June, Pioneer Natural Resources (NYSE:PXD) announced they were selling their Eagle Ford Midstream business to an EPP affiliate for $2.15 billion with the added benefit of fee reductions for downstream processing contracts with Enterprise.
3. Energy XXI sale to CorEnergy: In a smaller deal, but one that reveals the cash-raising mentality prevalent across the entire industry, Energy XXI (NASDAQOTH:EXXIQ) announced in June that they were monetizing the Grand Isle Gathering System pipeline assets in a sale to CorEnergy Infrastructure Trust for $245 million plus assumption of debt.
4. Plains All American purchase from Occidental: The Energy XXI deal was a recent example of a trend that has been going on for a while -- the popularity of pipeline transactions. PAA (NYSE:PAA) also illustrated the level of interest in this market last fall with November's $1.075 billion purchase of Occidental Petroleum's (NYSE:OXY) BridgeTex Pipeline Corp.
5. Williams buys Utica Assets: Despite the lack of numerous large acreage deals, some transactions are starting to get done and putting a floor under valuations. In May, the news broke that EV Energy Partners (NASDAQ:EVEP) was divesting its stake in Utica East Ohio Midstream LLC to a subsidiary of Williams Partners LP (NYSE:WPZ) for $575 million.
6. Dominion Partners Midstream IPO: Even as oil prices were collapsing, investors still displayed a willingness to look seriously at certain asset classes, as the IPO of Dominion Midstream Partners (NYSE:DM) showed.
7. Encana acquires Athlon: Last fall, in one of the biggest energy deals of the quarter, Encana (NYSE:ECA) and Athlon announced a $7.1 billion merger citing a desire to move out of natural gas-weighted assets and into higher-margin oil and NGL assets.
8. Howard Midstream Energy Partners moves into Marcellus: In April, word broke that Howard Midstream Energy Partners was purchasing Southwestern Energy's (NYSE:SWN) Pennsylvania natural gas-gathering assets for $500 million. The move illustrates the ongoing dichotomy in companies doubling down on oil and waiting for a price rebound versus those choosing to focus on high-quality natural gas assets.
9. EnLink buys out Coronado: In February, EnLink (NYSE:ENLK) companies announced a deal to acquire Coronado Midstream Holdings, including natural gas gathering and processing facilities in the Permian Basin for $600 million.
10. LINN cashes out of Texas and OK Plays: Last fall as the price collapse deepened, LINN Energy (NASDAQOTH:LINEQ) agreed to sell its entire position in the Granite Wash and Cleveland plays in the Texas Panhandle and western Oklahoma for $1.95 billion. In addition, the firm announced that it was selling positions in the Permian for $350 million. The total $2.3 billion in proceeds was used to fund LINN's acquisition of $2.3 billion in assets from Devon Energy (NYSE:DVN).