A Case Study on M&A Motives Within the U.S. Upstream Sector

Magnus Kjellén & Christian Bjork

Student thesis: Master thesis


Global mergers and acquisitions activity has exceeded the record streak of $3tn for four consecutive years. In 2017, $3.5tn of dealmaking was conducted, of which the United States accounted for approximately $1.5tn. Even though global mergers and acquisitions activity have slightly cooled down from previous years, U.S. mergers and acquisitions within the upstream sector climbed 30%, totaling $172.2bn during 2017. There has been a great amount of interest and activity within the oil and gas industry, in particular, within the U.S. unconventional sector, which has experienced tremendous development in the extraction of hydrocarbons from tight and shale formations. As a result, experts predict that the U.S. will become a net energy exporter by 2022, thus breaking the tradition of being a net importer since 1953. This thesis sought out to uncover what underlying motives Noble Energy, Inc. had to acquire U.S.-based Clayton Williams Energy, Inc. in early 2017. In addition, a peer analysis was conducted to investigate to what extent the underlying motives uncovered could be generalized. To aid and complement the research objective, the thesis furthermore intended to explore and identify the most prominent factors affecting the U.S. E&P-sector. Macro-factors such as economic growth and political factors is believed to have significant influence on key value drivers such as the oil price. The competitive landscape is characterized by expressively low differentiation, thus the sector is dependent on low production costs and the ability to maintain margins. The valuation in form of a DCF and EVA model indicated that Noble Energy paid a price substantially above the underlying economic value of CWEI. Nonetheless, several strengths and opportunities that motivates the acquisition was uncovered.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2018
Number of pages130