Latin America M&A landscape
Upstream M&A deal value in the Latin America during the first three quarters has reached around $8.3 billion, compared with nearly $0.6 billion during the same period last year. Of the total, activity has been concentrated in a few countries, with Brazil accounting for 46%, followed by the Trinidad and Tobago (29%), Peru (12%), Argentina (8%), Mexico (3%) and Colombia (2%). It is also worth noting that that the deal value in the 3Q24 reached nearly $5.3 billion, contributing to nearly 63% of the total this year and marked the highest quarter since 2019 – excluding certain outliers like Chevron’s acquisition of Hess’ Guyana portfolio for $42.6 billion in 2023, Petrobras’ sale of stakes in Atapu and Sepia for $6.5 billion in 2022, restructuring of state-owned EP PetroEcuador that is estimated to be worth $9.8 billion in 2021 and the Russian government’s acquisition of Rosneft’s Venezuelan assets for around $5 billion to protect it from sanctions in 2020. Going forward, the analysis excludes the forementioned outliers.

One of the notable trends this year is the increased focus on gas assets. While liquids account for 78% of total hydrocarbon production in the region, there has been a significant shift towards the gas sector in terms of M&A activity. The share of gas in overall traded resources in the region between 2019 and 2022 averaged at 22%, which since then has increased to 43% or 616 million boe (mmboe) in 2023 and to 52% or 1.1 billion boe through first three quarters this year. This surge began last year, primarily driven by Argentina and Mexico, which contributed around 92% of total traded gas resources in 2023. This is attributed to UK-based Harbour Energy’s acquisition of Wintershall Dea’s upstream assets, increasing its focus in Norway and Latin America. This trend has continued into this year, where 85% of total traded gas resources is attributed to Trinidad and Tobago (T&T).

It is also worth noting that Chevron’s acquisition of Hess last year significantly impacted the region, raising the total to nearly $48 billion. This single transaction accounted for nearly 90% of the region’s total last year. The deal includes 4.6 billion boe, representing 76% of traded resources last year, which amounted to 6 billion boe.

Looking ahead, we expect the region to see further growth in its appetite for gas resources, with Ecopetrol exploring the acquisition of some natural gas assets from Canacol Energy in Colombia. Additional contributions could come from gas-focused countries like Trinidad and Tobago and Peru, as well as unconventional shale focused M&A activity in Argentina.

Brazil, which previously dominated the M&A landscape, accounted for 64% in 2021 and 73% in 2022. In 2023, however, this percentage dropped to 6%, primarily due to Petrobras halting its divestment process. This year, the country has made its mark again by contributing nearly 46% of the total, driven primarily by an impending consolidation wave in the E&P sector. E&P companies pursued alternative avenues to inorganic growth, resulting in a wave of consolidation. This wave began as a viable growth option, which is quite evident with the planned merger between 3R Petroleum and Enauta. The largest deal announced so far this year in terms of deal value was PRIO's acquisition of a 40% participating interest in the Peregrino field from Sinochem for $1.92 billion, reinforcing its position as Brazil’s largest upstream independent operator. This was followed by the planned merger between Brazilian players 3R Petroleum and Enauta, at an enterprise value of around $1.4 billion – with the merged entity now renamed as Brava Energia. This deal also stands out as the largest Brazil-focused corporate merger since 2014.

This quarter, Pluspetrol acquired ExxonMobil's assets in the Vaca Muerta shale play, according to a media article citing an ExxonMobil spokesperson. The sale comes after ExxonMobil had been looking to sell these assets for more than a year. Though the value has not been officially disclosed nor whether the purchase includes QatarEnergy’s portion, industry sources cited by news publication Econojournal indicate the sale closed at $1.7 billion, marking it as one of the highest-valued transactions in Vaca Muerta’s history.

M&A outlook for rest of 2024
Assets worth nearly $3 billion are currently on the market. One of the potential deals involves state-owned Staatsolie, which is looking to acquire up to a 20% stake in Block 58 (Gran Morgu project) in Suriname. According to the Production Sharing Contract (PSC) for Block 58, Staatsolie has the right to participate up to a maximum of 20%. The block’s partners, TotalEnergies and APA Corp, have agreed that Staatsolie will contribute from the Final Investment Decision (FID) onwards, with the interest to be finalized by June 2025. Staatsolie aims to capitalize on the project, which plays a pioneering role in the country’s offshore development. Hess is currently seeking partners for Block 59 in offshore Suriname, following the exit of its partners ExxonMobil and Equinor in July 2024.

In addition to the various strategic moves by independent E&Ps in Brazil, Seacrest Petroleo, which has built its entire portfolio with Petrobras’ divested assets, has reportedly hired Goldman Sachs to help explore a potential sale. The company produced an average of 8,200 barrels of oil equivalent per day (boepd) in the first half of 2024. It is targeting to drill 300 infill wells over the next four years, with 20-30 wells planned for 2024. Seacrest says it aims to achieve an ambitious production goal of 30,000 boepd by 2028. These potential sales offer hints of a consolidation wave in the upstream sector, as seen with 3R’s acquisition of Enauta.

Elsewhere, YPF is looking to divest some conventional assets in Argentina. The Santander Bank has been engaged to facilitate this divestment and is understood to have initiated the process by sending out presentations to potential buyers and interested parties.

In Colombia, Ecopetrol is reportedly exploring the acquisition of certain gas assets from Canacol Energy. The natural gas sector in Colombia has been a major topic of discussion, as the country is expected to face a gas supply deficit by next year. Canacol’s output has annually contributed nearly 17% to the country’s overall gas production since 2020. Acquiring gas assets from Canacol would help Ecopetrol improve its depleting gas reserves. Still, this alone will not be sufficient to meet the country’s future gas demand unless deepwater discoveries like Sirius are brought online as soon as possible. Sinochem, after selling its 40% stake in the Peregrino and Pitangola fields, is reportedly looking to sell its overseas assets, including non-core assets in Colombia. These sales align with Sinochem’s long-term goal of simplifying its portfolio by exiting non-core upstream operations to focus on its core refining business.  

In Guyana, a joint venture between CGX Energy and Frontera Energy is looking to farm-down a part of its stake in the Corentyne offshore block and has hired Houlihan Lokey to assist in the sale. Elsewhere, Eco Atlantic is seeking partners for the Orinduik block in Guyana.

Given the potential deal pipeline and attractive opportunities in markets across various countries such as Argentina, Guyana and Suriname, Brazil, and Colombia, M&A activity this year is expected to exceed the levels seen between 2020 and 2023.

Authors: 

Vadranam Sai Krishna

Analyst, E&P Research
vadranam.krishna@rystadenergy.com

Atul Raina

Vice President, Upstream Research
atul.raina@rystadenergy.com

(The data and/or forecasts in this column are Rystad Energy’s, and the opinions are of the authors.)