04Q23 QUARTERLY M&A REPORT

THIS IS THE ABBREVIATED VERSION

Energy Advisors Group has released a Q4 2023 Special Report on the U.S. A&D marketplace as a continuation of our Market Monitor Series and thought leadership efforts. This 32-page Special Report provides perspectives on past and current trends in deal values, counts, plays and valuations. Also included are forward looking themes as buyers and sellers look to navigate a plethora of dynamics of the capital markets and interest rates, oil and gas supply and demand, regulatory and energy transition impacts, play economics and technology and geopolitical risks.

Our firm has over 35 years of experience assisting clients navigate the marketplace to maximize their portfolios as advisors on both the sell and buy side.

Quick Quotes:

------- "The last quarter of 2023 is one for the record books with $144 billion in deal value (per Enverus) on the back of just 15 transactions - of which Exxon & Chevron buys of Pioneer and Hess, respectively tally $124.5 billion of the total".

------- "2023 closed out with a record high $192 billion in deals, but don't be fooled, as this was on a record low of just 71 deals, even slower than the 92 deals recorded during Covid 2020 and compares to an average 210 deals annually dating back to 2013".

------ "Looking forward, expect greater deal flow as 2023 buyers high grade portfolios, natural gas comes back into play, private equity reloads and consolidation themes continue to play out".

----- Into 2024, consolidations continue at a torrid pace with Chesapeake taking Southwestern for $11.5 billion, APA taking Callon Petroleum for $4.5 billion and Talos buying QuarterNorth for $1.3 billion"

Takeaways from 4Q 2023---

1. Don't be fooled. Despite high profile mergers and long-awaited consolidation, the overall deal market remains slow and lethargic;
2. High interest rates, low natural gas prices & apathetic capital markets delivered what you might expect, low deal count, soft metrics and consolidation;
3. Analyzing Enverus M&A data we came up w/ average production multiples of ~$35,000 ppbopd for oil & ~$2,700 ppmcfpd for natural gas;
4. Enverus data shows EBITDA multiples for most deals are clustering around 3x forward 12-month forecasts;
5. On Oct 11, Exxon paid $64.5 billion in stock for pure play Permian powerhouse Pioneer at an~18% premium to it undisturbed prior price;
6. PXD increases Exxon's projected 2027 US production share to 45% and its short cycle (shale) portfolio to 40% also by 2027;
7. Just 2 weeks later, Chevron took down Hess for $60 billion in an all-stock deal struck at only a 5% premium;
8. Interestingly, internationally, Chevron’s Hess brings it a 30% non-op position in the exciting Guyana license operated by Exxon; 
9. Despite these two mega deals, our analysts note the underlying 4Q23 market was slow with Enverus only counting 15 deals (>$10 mm) in 4Q23 compared to Enverus usual ~53 deals per quarter over the past 10 years;
10. Once again, passive if not apathetic capital markets are restricting buyers leaving it to public companies to use their equity as currency;
11. Liquids! Like last quarter, oil assets lead the market taking 7 out of the top 10 deals;
12. Little cash is used - 76% of the currency was buyer's stock while a mere 15% was cash and 9% debt assumption in the last 25 large deals;
13. Persistence pays off as Tokyo Gas finally gets Rockcliff (Haynesville) for $2.7 billion; 
14. On the creative side, Mach Resources successfully completed an IPO at $19/unit on October 27, 2023 valuing the company at $1.8 billion and providing P/E backer Bayou City Energy a path to liquidity;
15. In 2023, P/E exits peaked in a flurry in 2Q23 accounting for ~50% of deal value. P/E exits slipped to 11% in 4Q23 driven by CrownRock's sale of Midland Basin assets to OXY for $12 billion;
16. In a surprise, Vitol's Vencer exits the Midland Basin in a $2.1 billion sale to Civitas which pivoted to 50/50 Permian & DJ operations;
17. Midland Basin "bonanza". The Delaware's sister Basin accounted for 45% of the US's $192 billion annual deal market far above other plays. 

Here are additional comments taken from Slide 5:

Here are some quick comments projected for 2024 M&A opportunities:

Here is more commentary from our abbreviated version of last years activities:

Energy Advisors Group is working hard to expand our thought leadership and look forward to providing additional market insight for our clients through regional perspectives, M&A analysis and market monitor. 

Our firm has been serving the needs of buyers, sellers and capital providers for over thirty-five years.

TO LEARN MORE AND RECIEVE A COPY OF THE FULL REPORT CONTACT:

Blake Dornak

Vice President

Phone: 713-600-0169

– Email: [email protected]

Brian Lidsky

Director

Phone: 713-600-0138

– Email: [email protected]

Ronyld W Wise

Founder & Managing Partner

-- Email [email protected]

Corporate Office:

4265 San Felipe Ste 650

Houston TX 77027

Corporate Switchboard: 713-600-0123