This interview with Houston-based Latham & Watkins partner Ryan Maierson looks at trends that emerged in 2011 and 2012 in upstream mergers and acquisitions in North America.

What investment trends emerged in shale in 2011?

Maierson: 2011 was a banner year for upstream M&A, particularly in the United States and North America — there was nearly US$150 billion dollars in E&P activity worldwide. If you narrow that down, about two thirds of US deals involved shale plays.

If you look at the second half of 2011, there were a number of multi-billion deals that drove a lot of these numbers both in terms of deal value and in terms of the percent that took place in shales. If you look at who the buyers are, you see private equity money making serious bets on the future of US shale development as well as some of the international oil companies getting into North American and US shale.

What is driving foreign interest in North American and US shale?

Maierson: It is thought there may be tremendous untapped shale opportunities in India, China and Indonesia. So some of what these companies may be acquiring is the US shale position in addition to the technical expertise, with the potential intention down the road to repatriate that expertise back home and use the technology and methodologies that they have acquired in the US to develop those shale plays in Asia.

What other M&A upstream trends are you watching?

Maierson: We are seeing a continuation in the movement away from dry gas M&A targets to liquids-rich and oil rich plays, which we have seen the past couple of years. That has been the ongoing theme driving much of the shale activity in the United States and much of the movement away from the dry gas basins in the United States.

We’ve also seen a renewed focus on the Gulf of Mexico by large independents as well as super majors. There is a growing confidence in the regulatory and permitting process and less uncertainty around the ability to get permits to continue or commence drilling. There’s also a new recognition that there is a lot to be drilled in the Gulf of Mexico and that maybe the US shales at their hottest time were distracting focus from the Gulf.

Why did deals become more asset level and less corporate level in 2012?

Maierson: There are fewer shale-focused E&P companies that are primary targets for potential acquisition by a larger company. I think that is one of the major shifts we are seeing now that the M&A market in the shale plays has become a little more mature. There is less lower hanging fruit — in terms of making corporate acquisitions in order to make a dramatic entry into this market.

What is driving the recent shift from upstream to midstream M&A activity?

Maierson: The value of midstream deals exceeded the value of upstream deals in the second quarter of 2012 for the first time in two years. So for the first time since the shale plays became the central focus of US M&A activity, there has been a shift back towards midstream activity — gathering, processing and transportation.

As oil and NGL prices have come down and as price volatility has gone up generally, you find buyers that are looking toward less commodity-sensitive businesses. There is a perception that some of the fee-based businesses in the midstream space are less commodity sensitive and are a safer place to park capital expenditures while the commodities price volatility sorts itself out.