Midstream transactions drove oil and gas strategic dealmaking efforts in the second quarter of 2015 as companies adapt their operations and business objectives to the lower oil price environment, according to PwC US.  In total, mergers and acquisitions (M&A) in the oil and gas industry increased in the second quarter of 2015 from the prior quarter, driven by midstream transactions from corporate buyers.

During the three month period ending June 30, 2015, there were a total of 47 oil and gas deals (with values greater than $50 million) accounting for $38.8 billion, compared to 39 deals worth $34.5 billion in the first three months of the year, and 65 deals worth $48.9 billion in the second quarter of 2014. The number of deals in the midstream segment jumped 110 percent while value increased 130 percent compared to the second quarter of 2014. There were 21 midstream deals, or 44 percent of total deal activity, contributing $27.7 billion in value. Additionally, master limited partnership (MLP) dropdowns and affiliate transactions generated 38 percent of the midstream transactions totaling $19.5 billion in the second quarter of 2015.

“Interest in the midstream sector drove second quarter deal volume and value as corporate buyers pursued opportunities to grow their gathering and transportation operations as U.S. onshore production continued to increase despite the  low oil and gas price environment,” said Doug Meier, PwC’s US energy sector deals leader. “Going forward, we’ll see activity continue as businesses realign their strategies to the current oil price realities.”

There were 32 corporate deals worth $34.2 billion versus 15 asset deals worth $4.6 billion in the second quarter of 2015. Corporate deals represented 68 percent of the total deal volume and 88 percent of the total deal value, which included three midstream megadeals (deals valued over $1 billion) in the quarter. Overall, there were five megadeals worth $25.9 billion, representing 67 percent of total deal value in the quarter.

Financial investors continued to show interest in the oil and gas industry with 17 transactions worth $10.8 billion, a 240 percent increase in deal volume and a 39 percent increase in deal value compared to the same period in 2014. Equity commitments from private investors accounted for 13 of these 17 financial deals worth $3.8 billion in the second quarter of 2015.

“Financial investors see opportunities to make investments as companies adjust their portfolios in this dynamic environment,” added Rob McCeney, PwC US energy & infrastructure deals partner.  “With cash on hand and experienced management teams in place, we expect to see more private equity commitments and deals in the second half of 2015.”

Total deal activity in the upstream segment continued to drop in the second quarter, accounting for 18 transactions representing $8.3 billion, or a decrease of 55 percent and 67 percent in total deal volume and value, respectively, compared to the same period in 2014. Additionally, the total number and value of oilfield services deals decreased 33 percent, to four deals, and 40 percent, to $1.6 billion, respectively, when compared to the same period last year. The total number and value of downstream deals also decreased by 56 percent and 87 percent, respectively, when compared to the second quarter of 2014.

According to PwC, there were 14 deals with values greater than $50 million related to shale plays in the second quarter of 2015, totaling $11.2 billion. This represents a 46 percent decrease in total deal value and a 46 percent decrease in total deal volume when compared to the second quarter of 2014.

“Buyers in the oil and gas industry continue to be opportunistic in shale formations as investors focused on specific resources to further enhance their positions in relevant basins,” said John Brady, a Houston-based partner with PwC’s energy practice.

Activity in the upstream sector related to shale plays continued to remain low accounting for nine transactions totaling $5.5 billion, compared to 21 deals worth $11.6 billion in the second quarter of 2014.

There were five midstream shale-related deals in the second quarter of 2015, accounting for $5.7 billion, as deal volume remained the same, but deal value decreased by 37 percent compared to the same period in 2014.