Maybe 2013 never had a chance, at least in dealmakers’ minds.

After 2012 global spending blew the doors off all previous years, perhaps it was inevitable that M&A after New Year’s would be seen as weak.

Still, record-setting M&A transactions in other industries, such as telecom, along with robust oil prices and broadly supportive capital markets make it appear as though energy M&A has stumbled, says Pavel Molchanov, an analyst for Raymond James.

Take a step back, though, and 2013 has had some exciting and pricey deals. Quietly, the Year of the Snake has hit the third-highest level of activity. Assets are being bought, and for huge sums. What’s actually sputtering is the corporate deal. Since 2005, corporate buyouts or partial equity stakes have plunged to 21% from 82%.

Assets, instead of entire companies, are targets.

Exhibit one: The largest domestic deal of 2013 is Devon Energy’s $6-billion purchase of GeoSouthern Energy’s Eagle Ford oil play in November. The deal was the largest Eagle Ford shale transaction to date, according to Jefferies & Co. Inc.

GeoSouthern is alive and well. It will continue to operate its other assets in the Texas Gulf Coast region and other areas.

Big purchases such as Devon’s give companies “more of what they want and less of what they don’t,” Molchanov says.

In 2013, roughly 10 E&P deals were in the $900-million to $1-billion range. The deals were asset-driven, with companies cherry picking sweet spots within plays.

Corporate M&A deals were around, too, but diminished.

“What’s remarkable is that the absolute dollar value of corporate M&A has surpassed the 2005 level of $106 billion only once, in 2012. The 2013 figure of $37 billion was only marginally higher than in 2008,” Molchanov says.

“Think about that,” he adds. “With all the asset value inflation since 2005, the amount of corporate M&A has actually tended to shrink.”

The cooling is evident by looking at the biggest deals. Only five corporate M&A deals have been greater than $15 billion since 2005.

BHP Billiton’s purchase of Petrohawk for $15.2 billion, Freeport-McMoRan’s purchase of Plains for $16.8 billion and CNOOC’s purchase of Nexen for $20.7 billion were classic style corporate buyouts.

But such M&A is being brushed aside for the typical reason: money.

Molchanov said buyers have become choosier and “less inclined to pay through the nose for a full-fledged corporate buyout in order to acquire one or two desirable assets.”

Corporate M&A involving geographically diversified and typically large-cap operators—such as Nexen—have been particularly rare recently.

Corporate M&A has moved to smaller operators with concentrated assets. The goal is to fill a particular gap in the buyer’s portfolio.

—Darren Barbee

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