The oil and gas industry is in a transitional phase as development of unconventional resources matures, and the lull in the A&D marketplace this year is a symptom of that evolutionary process, according to Jefferies & Co. managing director Bill Marko.

“The land grab is complete,” Marko declared, referring to E&P companies rushing to acquire premium positions in preferred unconventional plays over the past several years. “Now, in 2013, we're in the digestion period, or what I like to call the indigestion period.”

Marko spoke to some 450 A&D professionals at Hart Energy's A&D Strategies and Opportunities conference in Dallas recently.

Since 2005, some $560 billion in shale deals has been recorded altogether, measured against $735 billion in total US E&P deal value. Jefferies lays claim to 45 shale deals for $145 billion of the total. But following two record years, 2013 through August had seen merely $24 billion in total deal flow ($14 billion in shale deals), far short of the $60-billion pace set last year.

As the resource-play age emerged, companies like Chesapeake Energy, XTO Energy and Devon Energy led the way in amassing large acreage positions to build today's big plays. That was followed by a large capital influx by internationals and major integrated oil companies that has helped to fund the intense drilling required to develop the plays.

Increased M&A during this period, including ExxonMobil's play for XTO, Shell's deal for East Resources, Chevron's acquisition of Atlas Energy, and Statoil's buy of Brigham Exploration, resulted in fewer buyers in the marketplace.

“There are a lot of companies full up with a lot of deals they are trying to digest. Most of those that wanted to do deals have done deals, and they're in the chewing mode right now,” said Marko. “That's really slowed down deal flow.”

Capital shortages and manpower shortages play into slowed deal flow as well, he said.

“Operators are running at full speed. They have thousands of potential wells, and they feel the constraint of capital and manpower. The overall rig count feels as if it's nearly as high as it can be.”

Another factor: Increased levels of shareholder activism and CEO turnover are causing uncertainty for deal-making. Fourteen companies have experienced changes in chief executives in the past year, such as Encana, SandRidge, Talisman and Chesapeake.

“That's causing companies to take their time strategizing. This is affecting a lot of people that were deal doers.”

And while buyers once bought on the hope of an unconventional play, that dynamic has certainly changed. “It was easier doing deals a few years ago when people didn't worry much about the type curve, because you didn't have a type curve.”

Now, buyers want facts and figures, he said. “They want to see history. Buyers are getting more demanding.”

Today, master limited partnerships (MLPs) and private equity have become the most active buyers, with MLPs being particularly acquisitive in 2013, accounting for 43% of deals done.

“MLPs are logical buyers for shale assets as they become de-risked and infrastructure development allows for a true manufacturing process,” Marko said.

Private-equity-backed acquirers were smart in their timing, he said. “They didn't come in with the herd. They watched, saw the bottom of the gas-price market, and made some thoughtful deals.”

—Steve Toon