Midstream mergers and acquisitions transaction values took a beating in the first half of 2020 as historically low oil prices and a global pandemic forced pipeline companies to retool distressed balance sheets, according to S&P Global Market Intelligence data.
Equitrans Midstream Corp.'s merger with EQM Midstream Partners LP was the only billion-dollar deal announced during that period for which transaction value was available, a steep decrease from at least eight transactions exceeding $1 billion that were announced during the first six months of 2019. National Fuel Gas Co.'s acquisition of Royal Dutch Shell PLC's Appalachian upstream and gathering assets for $541 million was the second-largest deal, with the rest exceeding no more than $195 million each.
While several transactions in the first half of 2019 involved whole or minority stakes at the corporate level, activity for the same period in 2020 was primarily asset-based as companies tightened their belts. An oil price war between Saudi Arabia and Russia, combined with dwindling demand for fuels as COVID-19 spread rapidly, forced midstream companies to slash spending and investor payouts, putting M&A on the back burner for many management teams.
Of the biggest North American pipeline operators, only TC Energy Corp. purchased midstream assets after crude prices began to spiral in March. Private capital was not particularly active either, with just Black Bear Transmission LLC and Glenfarne Group LLC buying assets during the same period. Glenfarne acquired LNG Ltd.'s Magnolia LNG export project after the company's deal with Global Energy Megatrend Ltd. fell through.
For some public and private companies, however, financing is not necessarily the issue.
"Money is ridiculously cheap, thanks to the [U.S. Federal Reserve]," industry consultant Ethan Bellamy said in an email. "The problem is finding projects with upside in a declining production and suppressed margin environment. The only place that really needs new pipe — the Northeast — won't permit them."
Before oil prices crashed, Enbridge Inc., Phillips 66 Partners LP and Dominion Energy Inc. also announced some smaller-scale acquisitions, while private equity firm Quantum Energy Partners LLC combined portfolio companies Gemini Midstream Holdings LLC and Trace Midstream Partners LLC.
Evercore Group LLC and Barclays Capital Inc. advised on the most midstream M&A deals in S&P Global's North American coverage universe that included adviser information, with both banks involved in three transactions. The Evercore Inc. subsidiary advised EQM Midstream, Phillips 66 Partners and Shell Midstream Partners LP, while Barclays advised other Royal Dutch Shell subsidiaries in addition to Black Bear Transmission.
When it came to corporate restructuring deals, Guggenheim Securities LLC advised Equitrans as well as Summit Midstream Partners LP in its merger with Summit Midstream Partners LLC.