The normal pace of U.S. upstream deal flow slowed—but only slightly—to $21 billion in the first half of 2012, as both natural gas and oil prices hit near-term lows. Natural gas bottomed at a spot price of $2 per MMBtu, $3.27 per MMBtu for the three-year strip, and oil fell below $80 for the spot price, about $85 per barrel for the three-year strip, causing a market slowdown that has extended into the third quarter. Nevertheless, firming commodity prices have raised hope that deal flow could reach its normal full-year average of $60- to $70 billion.

Three distinct buyer groups emerged in first-half 2012: public independents and master limited partnerships (MLPs), large generalist private-equity funds, and international companies.

In both number of opportunities and total deal flow value announced during the first half, the largest buyer group was opportunistic public independents and MLPs. The active buyers are familiar names that always have their eyes on buying opportunities. They are skilled acquirers, understanding what it takes to win public auctions and knowing how to access exclusive opportunities. In the first half they included Apache Corp ., Concho Resources , Halcon Resources , Linn Energy , Marathon Oil (now an independent E&P) and SandRidge Energy .

The second buyer group—and one that spent nearly the same amount as the independents and MLPs—was made up of the large, generalist, private-equity investors. These included Apollo, GSO Capital Partners (Blackstone), KKR, Riverstone Holdings , TPG and others. As a group, these investors have generally been underweighted in energy investments. But in the past couple of years they have seen very attractive macro factors emerging, especially in U.S. natural gas pricing, and they see today as an attractive time for energy investment.

International companies form the third buyer group. Some entered the U.S. in the past few years, and their peers have followed. Their level of activity in evaluating deals and their knowledge base continue to increase. Korea National Oil Corp ., Marubeni, Osaka Gas and Sinopec led the group of internationals announcing deals in the first half of 2012. The group continues to be driven by the desire to invest in hard assets that offer potential upside, a window into new technologies and a physical hedge against rising commodity prices.

Independents And MLPs

In a large growth-oriented deal announced in January, Apache Corp . purchased liquids-rich Anadarko Basin assets (Granite Wash, Cleveland,