In recent weeks, the $30 billion-plus battle for Anadarko Petroleum has pushed energy M&A to the forefront of the dealmaking landscape. Not long after Chevron struck a pact to acquire the Permian Basin powerhouse, Occidental Petroleum swooped in last week with a competing bid of $76 per share, a 20% premium to Chevron's proposal—although major questions remained about whether it would be enough to persuade Anadarko shareholders.
On Monday, Anadarko announced it will negotiate with Occidental about a potential sale, a sign that it will at least engage with Occidental's hostile bid. Valued at $38 billion, compared to Chevron's offer of $33 billion, the deal would be one of the largest energy mergers in recent memory; likely, Occidental's primary motivator for such a move is the chance to consolidate its holdings in the Permian Basin. Analysts have already begun speculating that a merger could help launch a wave of more M&A in the space in the months to come.
For the US energy industry's interactions with private equity, on the other hand, it's been a much quieter year.
With April coming to a close, firms have invested just $9.9 billion this year across 37 private equity investments in the US energy industry, according to PitchBook data, with both of those figures on pace for clear decade lows. It's a stark change compared to last year, when investors spent $64.8 billion across 220 energy deals. That was among the highest deal values of the decade, as you can see here:
Other reasons are surely at play as well, but it's likely no coincidence that the sharp drop in dealmaking comes after the price of crude oil spent the final few months of 2018 in freefall, plummeting from above $75 per barrel at the start of 4Q 2018 to $42.53 per barrel on Christmas Day.
Thus far, this year's headline-grabber was in March, when a Blackstone-led group paid $3.3 billion to Kelso & Company to acquire a controlling stake in Tallgrass Energy, a midstream infrastructure company that operates across the central US. Singaporean sovereign wealth fund GIC and Spanish energy company Enagás co-invested alongside Blackstone.
It seems highly possible that private equity's investment in the US energy sector will pick up during the rest of the year, especially if, as industry-watchers have predicted, a sale of Anadarko helps prompt a dealmaking spree. But it seems equally probable that last year's record-setting pace will remain well out of reach.
Featured image via mrdoomits/iStock/Getty Images Plus
Want more on the PE landscape? Check out our 1Q 2019 US PE Breakdown.