Those who say the predicted rise in oil and gas private equity investments failed to materialize should take a second look upstream, where investors still find—and create—attractive deals.

Confounding expectations, falling oil prices did not bring about a landslide of private equity transactions in the oil and gas sector in 2016. The primary reasons appear to be continued price volatility, execution challenges, funding difficulties, and the fact that oil majors are holding tight to their "crown jewel" assets, leading to valuation gaps.

But in the upstream sector, there appears to have been a moderate overall increase in PE deals, reflecting the prevalence of attractive and available upstream assets. Known for creative solutions, PE firms are still finding ways to get the most attractive deals done: Witness the acquisition by Carlyle of a stake in Magna Energy (an India-focused upstream company) for up to US$500 million, and the acquisition by Macquarie and Brookfield of the entire share capital of Apache Energy Limited for US$2.1 billion.

Midstream takes second place in the hearts of PE investors today. Pipelines and processing plants generally carry long-term customer contracts with guaranteed and stable revenue flows that are typically not tied to oil prices, while capex and opex are usually more predictable, making them attractive to infrastructure-type funds.

With more quality assets set to come onto the market in 2017, signs suggest that PE investors very well may continue to capitalize on such opportunities. Exhibit One: In 2016, Shell commenced its three-year, US$30 billion assets sale program to pay for its acquisition of BG Group, and Shell has reportedly held initial talks with Neptune Partners, an investment company backed by CVC Partners and The Carlyle Group.