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Analysis

Energy M&A update: Q3 2018

The energy industry saw natural gas prices drop, partially due to the increased gas production. Along with this being favorable for consumers, the industry, as a whole, has begun to put in place protocols to help ensure a stable supply of oil and natural gas and improve infrastructure resilience during times of natural disaster. This Energy mergers and acquisitions (M&A) update provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the energy industry.

Energy trends

  • Carbon-free California—the landmark vote for the Golden State:1 California legislators recently voted on a mandate that, if approved by the state senate and governor, would require 100 percent of the state’s electricity come from carbon-free sources by 2045. The mandate requires renewable sources to power 60 percent of the state’s electric utilities by 2030, up from the current target of 50 percent. California, only second to Hawaii, are the only states to call for carbon-free electricity by 2045.
  • The utility market and fluctuation in natural gas prices:2 Natural gas prices have softened again back to May’s prices of $2.70/MMBtu, which is a good thing for consumers. The price drop happened in spite of high power generation from natural gas resources that accompanied the high temperatures this summer. Robust gas production is one of the main catalysts for the price drop. Strong stockpiles are considered crucial to meeting the winter gas heating demands. Change needs to be made in the industry update as well as per my previous comment.
  • Q3: A record-breaking quarter for oil and gas M&A:3 US oil and gas merger and acquisition (M&A) activity jumped by 250 percent from Q2 to Q3. This increase put the oil and gas M&A market for Q3 at a total of value of $32 billion. The $32 billion worth of M&A deals in Q3, which shattered previous quarters, was 76 percent higher than the quarterly average of $18.3 billion since 2009. Q3 broke all quarterly records dating back to Q4 of 2012.
  • Energy supply chain preps for active hurricane season:4 After the devastating impact of Hurricanes Harvey and Irma in 2017, the energy industry has made significant strides to help ensure a stable supply of oil and natural gas and improve infrastructure resilience. To reduce spikes to the supply chain, many fuel terminals are working non-stop to dispense supplies to service stations and companies and local, state, and federal governments are coordinating to bring gasoline and diesel supplies from neighboring states if necessary.

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References

Olliver Milman, “California moves towards 100% carbon-free electricity after landmark vote,” The Guardian, August 29, 2018, https://www.theguardian.com/us-news/2018/aug/29/california-electricity-fossil-fuels-wind-solar-vote, accessed October 12, 2018.

“Q3 2018 Outlook: Natural Gas Prices Have Softened Again,” RealPage, https://www.realpage.com/utility-management/outlook/#q1Outlook, accessed October 12, 2018.

Tsvetana Paraskova, “US Oil And Gas M&A Soar 250% In Q3 To Highest Since 2012,” OilPrice, October 4, 2018, https://oilprice.com/Latest-Energy-News/World-News/US-Oil-And-Gas-MA-Soar-250-In-Q3-To-Highest-Since-2012.html, accessed October 12, 2018.

Jude Clemente, “Hello, Michael: Beware The Resiliency Of The US Oil And Gas System,” Forbes, October 10, 2018, https://www.forbes.com/sites/judeclemente/2018/10/10/hello-michael-beware-the-resiliency-of-the-u-s-oil-and-gas-system/#58a555113700, accessed October 12, 2018.

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