Though the volume of energy-related M&A transactions has dipped to a nine-year low, several law firms are closing out 2013 by grabbing lead roles on a spate of big deals tied to the industry.
In the United States, shale plays continued to be the main driver of energy-related transactional work in 2013, says Joseph Dilg, an oil and gas industry veteran at Vinson & Elkins who headed the firm from 2002 through 2011.
Dilg and Vinson took the lead this week advising Houston-based energy investor EnerVest Ltd. on its $950 million sale of oil and gas assets in Texas’ potentially shale-rich Permian Basin to QEP Energy, a subsidiary of Denver-based oil and gas exploration company QEP Resources.
“The market is still strong in the number and size of transactions, particularly in the upstream space, and I think you’ll see companies continue to consolidate plays where they think they have some technical advantages in certain basins,” Dilg says. “And I think that’s something that will continue into 2014.”
Other Vinson lawyers advising EnerVest on its Permian Basin sell-off, which is expected to close in January, include tax partner Todd Way, environmental partner Sue Snyder and associates Julia Pashin, Shannyn Piper, Paul Seifert and Mingda Zhao. Former Akin Gump Strauss Hauer & Feld and Haynes and Boone partner Fabene Welch is EnerVest’s general counsel.
Holland & Hart corporate partner Janet Harris, tax partner John Maxfield, finance partner Lucy Stark and energy partner Elizabeth Mitchell are advising QEP on the transaction, along with company senior attorney Heidi Hande. Former senior attorney Christopher Woosley succeeded the retiring Eric Dady last year as QEP’s general counsel.
Vinson has also handled assignments for QEP in the past. The firm advised the company last year on its $1.4 billion acquisition of shale plays in North Dakota, where the money pouring into the state as a result of the local energy boom has been a financial boon to lawyers, as well as somewhat less savory industries.
TPG Capital also turned to Vinson this week to advise on its $435 million sale of a field solutions unit owned by portfolio company Valerus to British oil services group Kentz Corp. Vinson advised TPG in 2009 when the Fort Worth–based private equity firm took control of Valerus, according to our previous reports.
Vinson M&A partners W. Matthew Strock and Edward “Ted” Stockbridge are leading a team from the firm advising Valerus on its current deal with Kentz. Other lawyers working on the matter include M&A and private equity practice head Keith Fullenweider, employee benefits partner Brian Bloom, labor and employment partner Thomas Wilson, tax partner John Lynch, environmental partner Larry Nettles, litigation partner Neil Imus, M&A partner Francois Feuillat and associates Lauren Anderson, Matt Dobbins, Han Gao, Robert Jacobson, Martin Luff, Russell Oshman, Mark Wang and Jared Whalen.
Kerry Galvin serves as general counsel for Valerus, whose compression services unit TPG will continue to own. The private equity firm hired former Cravath, Swaine & Moore M&A partner Ronald Cami as its general counsel in 2010. (TPG’s billionaire cofounder David Bonderman is a former Arnold & Porter partner.)
Mayer Brown corporate and securities partners Robert Gray Jr. and Harry Beaudry are leading a cross-border team from the firm working on the deal for Channel Islands–based Kentz, which in September rebuffed a takeover bid by rival Amec. (British firm Simmons & Simmons advised Kentz on the Amec offer.)
In another U.S. energy industry deal announced this week, Houston-based industrial products provider DXP Enterprises tapped Norton Rose Fulbright—a firm formed this summer by the combination of London-based Norton Rose and Fulbright & Jaworski—for counsel on its $285 million acquisition of pump and integrated flow control solutions company B27 from private equity firm Champlain Capital Partners.
Dentons—a firm whose recent merger talks collapsed with McKenna Long & Aldridge—and Dallas-based Krage & Janvey are advising B27 on the proposed sale to DXP. The deal for the target company, whose clients are predominantly in the energy sector, is expected to close in the first quarter of 2014.
Vinson’s Dilg says that while transactional activity among domestic U.S. energy companies remains strong, the development of shale plays overseas has lagged, mostly due to a lack of water resources and adequate transportation infrastructure.
Nonetheless, Bloomberg reported this week that JPMorgan Chase expects energy M&A opportunities in Asia to increase in 2014 as companies in the region seek to shore up their energy reserves.
Sibling publication The Asian Lawyer reported this week that Herbert Smith Freehills, another firm that recently went through its own megamerger, has snagged a role for Houston-based InterOil on its $3.6 billion agreement with French energy giant Total S.A. to develop two natural gas fields in Papua–New Guinea. (Former Morgan, Lewis & Bockius associate Gaylen Byker serves as chairman of the board at InterOil, whose general counsel is Geoff Applegate.)
In Iraq, where tensions between Kurds and Arabs over oil rights have raised stability concerns, Exxon Mobil agreed late last month to sell a 25 percent stake in an oil field in the southern part of country to China’s largest oil and gas producer, PetroChina. The Chinese company relied also on Herbert Smith Freehills for counsel on the deal, according to The Asian Lawyer. Exxon Mobil, whose general counsel is S. Jack Balagia, handled its end of the transaction in-house.
Meanwhile, Spain’s Compania Espanola de Petroleos (CEPSA)—the country’s second-largest oil company—struck a $2.2 billion deal last month to acquire Houston-based Coastal Energy, owner of oil and gas assets in Thailand and Malaysia. (Abu Dhabi’s sovereign wealth fund took control of CEPSA in 2011.)
Baker & McKenzie, Freshfields Bruckhaus Deringer, Canadian firm Blake, Cassels & Graydon and offshore firm Conyers Dill & Pearman are advising CEPSA, while Cleary Gottlieb Steen & Hamilton, Stikeman Elliott and offshore firm Walkers are counseling Coastal Energy, according to a press release announcing the deal. John Zaozirny, a former counsel at Canadian firm McCarthy Tetrault who once served as Alberta’s minister of energy and natural resources, is a member of Coastal Energy’s board.
Separately, CEPSA, Total and Canada’s Talisman Energy announced this week that they were selling a collective 22 percent stake in Colombia’s Oleoducto Central, the largest crude oil pipeline system in the country, to Boston-based private equity firm Advent International for $595 million.
Weil, Gotshal & Manges private equity partner Marilyn French, banking and finance partner Allison Liff, tax partners Marc Silberberg and Mark Schwed and associates Joseph Bernardi and Julian Lista are advising longtime client Advent on the matter. Two years ago, Advent hired former Weil private equity cochair James Westra to become its chief legal officer. ( Liff rejoined Weil earlier this year from Goldman Sachs, while Schwed will officially be promoted to partner on Jan. 1.)
The biggest deal so far in the end-of-year energy transactional frenzy came Wednesday with the announcement that Canadian gas and electric utility Fortis has agreed to acquire Tucson-based UNS Energy Corp. for $2.5 billion in cash.
John Reiss, the global head of White & Case’s M&A group, is leading a team from the firm advising St. John’s, Newfoundland and Labrador–based Fortis that includes energy markets and regulatory head Earle O’Donnell, M&A partner Matthew Kautz and associates Sunny Kim, Luke Laumann and Jennifer Mersing.
Reiss—whose hourly rate stood at $1,100 two years ago, according to a report by The Wall Street Journal—did not respond to a request for comment on the deal by Fortis. White & Case advised Canada’s largest utility on its entry into the regulated U.S. electric and natural gas market last year through its $1.5 billion buy of CH Energy Group, a transaction that closed this past summer.
Leading Canadian firm Davies Ward Phillips & Vineberg and Phoenix-based Am Law 200 firm Snell & Wilmer are also advising Fortis on its proposed purchase of UNS. The deal is expected to close by the end of 2014, pending the approval of the Federal Energy Regulatory Commission and the Committee on Foreign Investment in the U.S., as well as regulators in Arizona. Ronald McCabe serves as Fortis’ general counsel.
UNS is a utility holding company that generates most of its revenue from three Arizona-based electric subsidiaries. A team of Baker Botts lawyers led by M&A partner William Lamb, energy partner Michael Didriksen, tax partner Don Lonczak, environmental partner Matthew Kuryla, employee benefits partner J. Rob Fowler and associates Zach Craft, Brandon Essigman, Brendan Dignan and Brittany Uthoff are advising the company on its sale to Fortis.
When asked about broader M&A trends in the energy field, Lamb and Didriksen’s crystal ball was cloudy, although the latter noted an “ongoing need for consolidation” in the regulated utility space. The sale of UNS to Fortis includes the assumption of $1.8 billion in company debt, bringing the total purchase price to $4.3 billion.
UNS, formerly known as UniSource Energy, has several lawyers on its board of directors, including Lawrence Aldrich and former LeBoeuf, Lamb, Greene & MacRae partner and Holland & Knight of counsel Daniel Fessler, a key player in the California electricity crisis of 2001.
Todd Hixon serves as general counsel for UNS. Davis Polk & Wardwell corporate partner Phillip Mills counseled Lazard, financial adviser to UNS on its deal with Fortis.
In another cross-border Canadian energy deal announced this week, Tulsa-based oil and gas company Petroflow Energy announced that it has agreed to pay $230 million to buy Calgary’s Equal Energy, a day after one of the latter’s largest shareholders threatened a proxy fight, according to The Oklahoman.
Kirkland & Ellis and Canadian firm McMillan—the latter a product of a late 2010 merger up north—are advising Petroflow on the deal. The company’s general counsel is Louis Schott. Equal Energy has turned to Dorsey & Whitney and Stikeman for outside counsel on its proposed sale to Petroflow.
Stikeman is also currently advising private equity firm Oaktree Capital Management on a merger between its Dallas-based portfolio company Shermco Industries and Magna Electric Corp., the largest electric company in Saskatchewan. The target company has teamed up with Shermco to work on electrical systems and pumping stations related to Canada’s controversial Keystone Pipeline, according to the Leader-Post of Regina.
Meanwhile, a neighbor south of the U.S. is poised to lift its longtime restrictions on foreign investment in the country’s state-controlled oil industry. Mexico’s Senate approved a controversial bill this week—one legislator stripped himself nearly naked in protest—that will allow foreign companies to profit from oil and gas drilling agreements with state-backed Pemex.
The Deal reported earlier this year that the reforms could pave the way for more dealmaking in Mexico’s energy sector. Skadden, Arps, Slate, Meagher & Flom is one of several major Am Law 100 firms poised to benefit from the changes, according to Latinvex.
The vote comes the same week that Houston-based NET Midstream closed on $665 million in financing for a cross-border pipeline project between the U.S. and Mexico, which required FERC approval. Milbank, Tweed, Hadley & McCloy advised lenders on the project, which comes as U.S. natural gas exports to Mexico have continued to grow, according to an analysis by Mayer Brown, which notes that Mexican energy reforms could lead to more disputes between miners and hydrocarbon producers.