Washington (Platts)--11Feb2013/416 pm EST/2116 GMT

This year may be when that deep-pocketed major and national oil companies snatch up North American shale gas acreage, taking advantage of the discount between North America's cheap gas prices and steeper prices worldwide, accounting firm Deloitte said Monday.

"We continued to see strong interest from foreign buyers, including state-owned enterprises," Deloitte partner Jim Dillavou said.

"Those companies are getting involved in North America's oil and gas markets in order to better understand shale and tight oil resources." Deloitte principal Treavor Thomas said. "NOCs want to be a part of the North American energy business. It is where a lot of the technology is based, and where many skilled workers reside. NOCs want to leverage that technology and skill in other parts of the world."

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Globally, Deloitte counted $321.5 billion worth of merger and acquisition deals in 2012, including the $61.6 billion purchase of TNK-BP by Russia's Rosneft. Deloitte counts deals worth $10 million and discounts deals between affiliated companies.

Competing firms PwC and Ernst & Young differed over how hot or cold the M&A market is for US oil and gas producers. PwC last week said the fourth quarter was the hottest in 10 years. PwC's survey only covers deals worth more than $50 million. Ernst & Young, which excludes fewer deals from its screen, found the US market had 19% fewer M&A deals in 2012.

Deloitte found 404 deals worth $187 billion in North America in 2012, more than half the global value. Deloitte tracks deals in the upstream, downstream, and mid stream sectors, as well as services and refining and marketing.

In 2011 there were 494 deals done in North America for a total $207.3 billion, Deloitte said.

"The large integrated companies need to increase production, and one way to do that is through prudent acquisitions," Deloitte principal Roger Ihne said.

"North American natural gas assets may look particularly attractive to buyers with long-term time horizons, given depressed prices that may be putting pressure on smaller companies to sell," Deloitte's report said.

"At some point the valuations in the natural gas area become so attractive that buyers with a long-term strategy can make a good deal of money," Ihne said.

The firm does not expect natural gas prices to move significantly higher in 2013.

"Once again, producers fell victim to their own effectiveness as natural gas liquids prices reacted to the resulting increased supply by weakening in 2012, creating further pressure on gas producers," Deloitte noted.

In the midstream sector, Deloitte predicted the emergence of master limited partnerships as companies move to shore up their positions in and around major shale plays.

Midstream M&A activity was quiet in 2012, Deloitte said, with $35.6 billion in deals, less than half that of 2011's $84.5 billion, although that year's number was skewed by Kinder Morgan's $21.2 billion purchase of El Paso's pipeline group.

"Deloitte believes that, over the next few years, the size of capital expenditures in the midstream area could easily exceed the current market cap of those companies," Deloitte's US Oil and Gas Leader John England said. "It is therefore reasonable to think that we could see some bigger players enter the market, some consolidation take place, or a combination of both, if the midstream segment is going to continue to support the shale and tight oil activity that is taking place in the US."

"We are witnessing the emergence of 'supermajors' in the MLP sector, with big players getting bigger," Deloitte principal Jed Shreve said. "Looking ahead, we expect continued growth in this area, and related acquisition activity, as MLPs search for quality assets to grow their distributions."

--Bill Holland, bill_holland@platts.com
--Edited by Jeff Barber, jeff_barber@platts.com

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