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Energy M&A value surges in Q2 thanks to one big deal

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The value of energy-related mergers and acquisitions in the second quarter hit the highest level since the end of 2012, but the number of M&A deals was the lowest in years.

According to a new report from the U.S. Energy Information Administration, the total value of energy M&A deals announced last quarter was $115 billion — the highest since the fourth quarter of 2012.

But most of that came from Royal Dutch Shell PLC’s (NYSE: RDS-A, RDS-B) $84 billion acquisition of BG Group PLC, which was announced in April. The Netherlands-based Shell and London-based BG Group both have a significant presence in Houston.

However, even without the Shell-BG Group deal, the remaining $31 billion in energy M&A for Q2 is still well above the puny $18 billion recorded in the first quarter, the lowest since at least 2008.

Although the value of deals picked up last quarter, the number of energy M&A deals continued to drop, reaching the lowest level since the end of 2008.

Only 137 deals were announced last quarter, down 42 percent from the quarterly median over the previous two years.

Of the Houston-based energy companies that announced M&A deals in Q2, many acquired fellow Bayou City companies. Noble Energy Inc. (NYSE: NBL) acquired Rosetta Resources Inc. in a multibillion-dollar deal that closed this month. Vanguard Natural Resources LLC (Nasdaq: VNR) announced plans to acquire Eagle Rock Energy Partners LP (Nasdaq: EROC) in a $614 million deal— exactly one month after it announced the $539 million acquisition of LRR Energy LP (NYSE: LRE). Both Vanguard deals are expected to close in the third quarter.

“M&A activity often reflects how market participants view future opportunities,” the EIA writes. “The availability and cost of financing as well as legal factors also play a critical role in the value and amount of M&A activity.”

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