There were no major mergers and acquisitions related to development in the Marcellus Shale during the third quarter, the first time no big-dollar deals have been registered since early 2010, according to a report scheduled for release today by PricewaterhouseCoopers.
The culprits in the drop: a dwindling supply of available foreign investors and stubbornly low gas prices that have pushed producers toward other regions, said Steve Haffner, a Pittsburgh-based partner in the accounting firm's energy practice.
Every quarter, PricewaterhouseCoopers releases a study of energy sector deals worth more than $50 million. The nationwide number of these so-called "major" deals fell overall in the third quarter, with the energy industry seeing 39 deals worth $33.7 billion in the past three months -- down from the 44 deals worth $41.1 billion seen in the same quarter last year.
Yet none of that increase was seen in the natural gas-rich Marcellus Shale region of Pennsylvania and surrounding states, where no deals worth more than $50 million registered for the first time since PricewaterhouseCoopers started tracking Marcellus development almost three years ago. The neighboring Utica Shale of Ohio saw one deal worth $600 million.
Nationwide, the number of foreign investors dropped in the third quarter, with international investment totaling $4 billion, or less than one-fourth what was spent in the third quarter of 2011.
That drop might provide some insight into the Marcellus plummet, said Mr. Haffner.
There is a finite number of viable international investors, he said, and "the folks who wanted to have a toe in the water got their toe in previous years."
In addition, foreign and domestic interest remains in more liquids-rich formations, where oil and natural gas liquids can be extracted and sold at higher prices that plain natural gas. The Marcellus is primarily a natural gas play, and that doesn't encourage major deals with price dynamics as they are, said Mr. Haffner.
The trend toward liquids-rich shales has perked interest in the Utica Shale, which contains more oil and liquids than its neighbor to the east.
The number of major Utica deals remains small, though, since companies are still leasing property that they can later sell in bulk as plots of contiguous land, said Mr. Haffner.
"The pieces need to be in order to build the critical mass," he said. "If Marcellus is a toddler, then Utica is still in its infancy."
Erich Schwartzel: firstname.lastname@example.org or 412-263-1455.