Billion-dollar deals are starting to become more common in the oil and gas industry, according to investment-banking and M&A advisory firm Scotia Waterous managing director Adrian Goodisman, based in Houston.

The large asset sales the industry is now seeing are becoming much more common, Goodisman said at a recent IPAA program in Houston. The firm is handling more than $2 billion per month of transactions in roughly 50 asset and corporate assignments a year globally, with deals typically ranging from $50 million to $1 billion.

"You're seeing bigger packages come to market, when two to three years ago you wouldn't see packages that big come to market," he said.

Currently, large-cap companies represent 30% to 40% of deal-making on the buy-side (in terms of dollars being spent). The supermajors are not doing much buying. The greatest percentage of assets sales in 2002-05 was private-company offerings. The trend, beginning in 2006, has shifted to more public-company offerings. This is due in great part to very large asset offerings by Anadarko Petroleum Corp. and Dominion Resources.

In 2005, 2006 and year-to-date 2007, the largest percentage of U.S. M&A money was spent on acquisitions in the Gulf of Mexico, while the largest number of deals was more evenly distributed across all basins, with the ArkLaTex region ranking consistently near the top in terms of number completed.

Prices being paid for Gulf of Mexico properties are consistently high compared with other regions, largely in part because of the shorter reserve-to-production ratio. "The regions with the higher dollar-per-barrel acquisition prices tend to be the ones with the shorter R/P ratios," he said.

Deal values are giving greater weight to oil. "From 2002 to 2005, you were paying more for gas transactions than you were for oil, but starting in 2005, you were paying more for oil, largely due to the run-up in oil price."

North America continues to be the most active M&A region, representing 51% of deal value in 2006 globally. Approximately 180 U.S. deals were closed, totaling $82.2 billion.

"It used to be the U.S. was the more expensive place to do deals, but the rest of the world is catching up, so now it's pretty much expensive to do deals everywhere."

Still, with India only producing roughly 800,000 barrels of oil per day and Japan and South Korea having no production, Asian companies are taking an increased interest in the U.S. Nippon Oil and Mitsubishi recently acquired an interest in the K2 Unit in the Gulf of Mexico from Anadarko for $1.2 billion, paying more than $100,000 per flowing barrel. Scotia Waterous marketed the assets for Anadarko.

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