HOUSTON—The U.S. remained on top of global A&D in 2016 with a $60 billion year while the worldwide oil and gas industry stoked deals—including a record seven transactions of more than $10 billion, according to a Feb. 7 report by Deloitte.

The Permian Basin outstripped all other regions, with deal making intensifying in the second, third and fourth quarters of 2016. The basin accounted for nearly 50% of all U.S. upstream transactions.

However, most of the deal making in the Permian, and the Delaware in particular, was driven by “riskier” non-producing assets with E&Ps favoring potential over production, Deloitte said.

At a press conference, Raymond Ballotta, a member of Deloitte’s M&A leadership team, told Hart Energy his clients are employed reservoir engineers and experienced operators in the Permian.

“They feel like they have conviction in accessing multiple stacks in the play,” he said.

The year began with deals averaging roughly $10,000 per acre. By year’s end, five Permian deals averaged at least $40,000 per undeveloped acre. The highest price for undeveloped resources in the basin came from Diamondback Energy Inc.’s (NASDAQ: FANG) purchase of Delaware acreage from Brigham Resources for $2.4 billion.

Permian acreage prices actually peaked in the second quarter at about $58,000 per acre with QEP Resources Inc.’s (NYSE: QEP) deal to buy 9,400 Northern Midland Basin acres for $600 million. Production was just 1,400 barrels of oil equivalent per day (boe/d).

Private-equity (PE) companies took advantage of Permian appetites and overall interest in acquisitions—fueled by investor approval of portfolio rationalization.

PE and PE-backed firms capitalized on the higher valuations. Though they were involved in a greater number of deals as buyers in 2016—69 deals compared to 56 in 2015—by valuation, they sold in bulk. PE firms executed $30 billion in sales compared with $17 billion in acquisitions.

Ballotta said as valuations in the Permian have risen, other plays continue to become more attractive. The Eagle Ford and Marcellus shales are targets and, at $60 oil prices, the Bakken could be targeted.

Eagle Ford A&D was a series of fits and starts in 2016, with acreage values varying widely.

In March, Carrier Energy Partners II LLC spent $37,000 per acre to purchase from AWE Ltd. By October, Wildhorse Resource Development Corp.’s (NASDAQ: WRD) acquisition of Clayton Williams Energy Inc.’s (NYSE: CWEI) East Central Texas Giddings area fetched $400 million or $4,600 per acre.

The Eagle Ford constituted less than 5% of U.S. deal value but started January with nearly $3.5 billion in deals—pointing to a potential recovery in the basin for 2017.

Clues to the 2017 outlook are found in the profile of recent buyers and their funding sources.

During the past nine to 12 months, small- and mid-sized publicly listed companies and large oil companies took the lead driving A&D activity.

During the same time, the market for both primary and secondary equity issuances was strong in 2016, with U.S. upstream capital nearly doubling to about $32 billion compared to 2015. The IPO of Extraction Oil & Gas raised $633 million—the highest amount raised in the sector since crude oil prices started to fall in mid-2014.

International A&D activity also showed signs of revival.

Russia had a strong 2016 after taking a break from making deals in the past couple of years. Kremlin-controlled oil company Rosneft acquired a majority stake in Bashneft for $10.35 billion and sold 19.5% equity to Glencore and Qatar Investment for $10.96 billion in fourth-quarter 2016.

In December, Rosneft also agreed to buy up to 35% of an offshore natural gas project in Egypt for $1.57 billion. Overall, Rosneft’s upstream A&D activity totaled $28 billion in 2016.

Latin America also saw deals last year as the region’s governments undertake energy reforms to reduce massive debts.

“After sales of just $770 million in 2015, deals running up to $8 billion provided some support to cash-strapped national oil companies [NOCs] in the region,” Deloitte said.

Last year, Brazil’s Petrobras sold $6 billion worth of assets in Brazil and Argentina to Pampa Energia SA, the largest electricity company in Argentina, as well as to major oil and gas companies.

Darren Barbee can be reached at dbarbee@hartenergy.com.