Midstream continued to roll and upstream continued to wobble in PwC’s Oil & Gas M&A analysis of second-quarter transactions.

Midstream accounted for 21 of the 47 oil and gas deals with values greater than $50 million, or 44%, with the value of those transactions adding up to $27.7 billion, or 71% of the $38.8 billion total. The 21 deals followed 22 in the first quarter, the first time the sector has surpassed 20 deals in two consecutive quarters since fourth-quarter 2012. There were 39 total deals worth 34.5 billion in the first quarter.

Upstream companies, however, have been stymied by oil prices that plunged in the latter part of 2014, stabilized, then tumbled another 20% in the past month.

“Companies, as a result of the decline in commodity prices, looked inward and really focused on cost-reduction initiatives,” Doug Meier, PwC’s U.S. energy sector deals leader, told Hart Energy. “That focus took management time and attention, as well as operational time and attention, and we saw a de-emphasis on M&A as a growth vehicle.”

Upstream companies accounted for 18 transactions worth $8.3 billion in the quarter, a decrease of 55% in volume and 67% in value over the same period in 2014. Much E&P activity is related to shale plays, where nine transactions totaled $5.5 billion, a harsh reduction from the same period last year that saw 21 deals worth $11.6 billion. The most active play for M&A in the quarter was the Utica.

“Buyers in the oil and gas industry continue to be opportunistic in shale formations as investors focused on specific resources to further enhance their positions in relevant basins,” said John Brady, a Houston-based partner with PwC’s energy practice, in a statement.

Oil prices drive value and pricing from an M&A perspective, Meier said, and with those pricing levels remaining stubbornly low companies have been forced to contend with a new normal. In the meantime, that pricing uncertainty translates into corporate valuation uncertainty.

“We have seen a fairly significant disparity between what buyers may be willing to pay for an asset and what sellers are willing to sell an asset for,” he said. “So that bid-ask spread, that gap in expectations, has made it more difficult for M&A transactions to get consummated.”

Upstream companies have also been able to access public and capital markets and have instituted hedging programs to supplement cash flow and strengthen balance sheets. Those factors also contributed to the decline in M&A activity among E&P companies in the first half of the year.

On the midstream side, the rise of MLPs has created a larger universe of participants in M&A than existed when the sector was largely composed of units of large integrated companies. MLPs are now positioned to grow through acquisition, thus complementing their organic expansion projects.

“Clearly, from an MLP perspective, the goal is to—on a regular and frequent and predictable basis—increase your distributions,” Meier said. “M&A provides that opportunity for the quicker return projects as opposed to the greenfield projects, which take a significant amount of time for construction, permitting and processing before the returns are generated.”

Twelve of the 21 midstream transactions in the quarter involved MLPs and six of those were dropdowns, a trend similar to the first quarter.

“Looking forward, we think that the dynamics will continue to be there to see significant activity in the M&A space of midstream in the second half of 2015,” Meier said.

PwC projects an uptick in upstream M&A as well, as hedging programs begin to roll off, the ability to raise financing debt lessens for some players and cost-reduction efforts reach the point of diminishing returns.

“We’re starting to see some narrowing of the bid/ask spread, of buyers’ expectations, sellers’ expectations around pricing,” Meier said. “A combination of those factors, we think, will lead to an acceleration of E&P in the second half of the year.”

The report also showed a 40% decrease in oilfield services deals compared to second-quarter 2014, and an 87% decline in downstream deals.

Joseph Markman can be reached at jmarkman@hartenergy.com.