The M&A market in oilfield services ground to a virtual halt in Q3, its slowest in deal value in at least five years, according to the Enverus Drillinginfo M&A Database. Combined, the entire sector produced only $2.53 billion in combined deal value in Q3—less than Transocean’s acquisition of OceanRig UDW in September 2018. All of 2019 has produced only $10.35 billion in announced deals compared with $13.24 billion in 4Q18.
Crude’s rally in early 2018 followed by the 4Q18 price collapse could share some of the blame for the transaction stagnation. The sharp decline prompted E&P firms to cut back their production or do more for less capex. This trickled down into OFS, which has felt investor pressure.
From North American frackers to offshore drillers, many oilfield services segments complain of oversupply. While consolidation would be one way to reduce pricing pressure, investors could be reluctant to endorse larger companies.
In fact, the two largest M&A transactions in the past 10 years are in the process of being undone. General Electric started eyeing the exit almost as soon as the $33.9 billion merger of GE Oil & Gas and Baker Hughes closed in July 2017. GE finally reduced its stake in Baker Hughes to a minority one in September.
Technip and FMC Technologies also closed their merger in July 2017, but TechnipFMC announced in August that it would start to undo some of the $6.76 billion merger. The company intends to spin off its Onshore/Offshore segment into a new company to be headquartered in Paris, with its Subsea and Surface Technologies segments remaining in a company based in Houston.
The largest deal of Q3 was also announced July 1, the first day of the quarter. Dubai-based marine terminal operator DP World expanded into marine logistics services, buying Topaz Energy and Marine Ltd. from Oman-headquartered support vessel operator Renaissance Services and Standard Chartered Private Equity/Affirma Capital. The $1.079 billion transaction is the second-largest A&D deal in OFS this year and accounted for 43% of Q3’s total.
Topaz operates a fleet of 117 vessels, predominantly in the Caspian Sea, Middle East, North Africa, and West Africa. The company offers towing, anchor handling and mooring, subsea services, and transportation of large modules, cargoes, crew, and supplies among other services. It employs more than 2,500 people and reported 2018 revenue of $349 million.
The largest deal in North America came at the end of the quarter. NGL Energy Partners announced Sept. 26 that it agreed to acquire Hillstone Environmental Partners, which provides water disposal and logistics in the Permian and Williston basins and the Marcellus/Utica play, from Golden Gate Capital for $600 million.