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Analysis

Energy M&A update: Q1 2019

The energy industry is continuously tasked with finding newer, greener alternatives to energy sources. This past quarter saw a spike in corporate investments in renewable energy, such as solar funding, as well as investments in distributed energy resources (DER) by companies and consumers in parts of the southern US who are focused on managing their energy consumption. Deloitte Corporate Finance LLC's Energy & Resources Quarterly Update provides insights and market data analysis that shed light on mergers & acquisitions (M&A) trends within the energy industry.

Energy trends

  • Texas consumers increase investment in distributed energy resources1: Many Texas homeowners, small business owners, and large industrial users are increasing investment in distributed energy resources (DER) and actively managing their energy consumption. According to a recent report completed by the Texas Clean Energy Coalition, consumers in Texas have increased their spend 62 percent on DER in the past two years, particularly on solar installation and natural gas-powered microgrids.
  • Corporate investments in renewable energy surge2: The total solar market received $2.8 billion in corporate funding in Q1 2019. Public markets, venture capital, and debt financing for solar projects were up by 10 percent as compared to Q1 2018. Announced large-scale solar funding soared to $5.68 billion across 43 deals, which is up from the 47 deals worth $2.8 billion in Q4 2018. The 2018 struggles related to tariffs, subsidy/installation cuts, and module oversupply situation has rebounded. The market is poised for growth, as shown by the rebound in solar equities in Q1 2019.
  • US oil production simmers down in Q13: The Energy Information Administration (EIA) released its production report showing US oil production was likely flat from December 2018 through March 2019, due mainly to a shortfall in shale production within the Permian basin. January 2018 production fell 91,000 barrels a day from the final month of December. The EIA now projects the US will produce 12.39 million barrels per day in 2019, up from their previous estimate of 12.30 million barrels per day.
  • Private buyouts deals to surge in oil and gas pipeline M&A4: M&A activity for midstream energy was dominated by reorganizations in 2018. M&A analysts expect pipeline companies to join in operations as public equity funding for the sector remains scarce. Private equity firms, who are sitting on a lot of investable capital, are expected to play a large roll in selling non-core assets for these energy companies in 2019. These firms are often willing to pay more than industry players as many believe multiples are rising given the upbeat trading environment.

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References

1 “Study: Texas Investment in Distributed Energy Resources Growing Steadily,” Electric Light & Power, March 28, 2019, https://www.elp.com/articles/2019/03/study-texas-investment-in-distributed-energy-resources-growing-steadily.html, accessed April 8, 2019.
2 Saumy Prateek, “Global Solar Market Receives $2.8B in Corporate Funding in Q1 2019,” Mercom, April 12, 2019, https://mercomindia.com/global-solar-market-receives-2-8-billion-q1-2019/, accessed April 14, 2019.
Damien Monroe, “US Energy Production Boom Softens,” Oil & Gas 360, March 28, 2019,
https://www.oilandgas360.com/u-s-energy-production-boom-softens-eia-lowers-q1-production-but-still-boosts-2019-forecast/, accessed April 13, 2019.
4 “Joint Ventures, Private Buyouts to Dominate 2019 Oil, Gas Pipeline M&A,” S&P Market Intelligence, December 20, 2019, https://www.spglobal.com/marketintelligence/en/news-insights/trending/7AIXksRb4Pc3dvmpJP9m5w2, accessed April 14, 2019.

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