The number of merger and acquisition deals in the energy sector during the first half of the year rose and fell with the price of a barrel of oil, according to a study from Deloitte Center for Energy Solutions.

When commodity prices were falling, Deloitte & Touche LLP's M&A transaction services practice partner Jim Dillavou says the number of M&A deals and their values fell.

"We think most of the decline can be attributed to the up-and-down process of deal-making," says Dillavou. "It also probably reflects the movement of oil prices, which ran up to near record highs and have now receded. The high prices likely caused some people to pause and reassess transaction values, but now that prices have softened, deal activity may return to trend-line levels."

By Deloitte's count, the total upstream deal count for the first half of 2011 was 149, down from 164 in the first six months of 2010. The value of trades dropped from $80.5 billion during the first half of 2010 to $53.6 billion during the same period in 2011.

Most of the activity in the first half of 2011 was in North America, with shale plays still attracting deal activity and interest. Encana Oil & Gas Inc. sold a portion of its Piceance gas midstream assets in Colorado to an unidentified buyer for about $590 million.

"Following our Fort Lupton gas plant divestiture earlier this year, this Piceance divestiture represents our second successful step in capturing significant unrecognized value from our midstream assets," says Renee Zemljack, Encana's executive vice president midstream, marketing and fundamentals.

Encana's business strategy is to be a first mover in the development of natural gas resource plays. Once built and operating, it sells the assets to premium midstream operators, which frees up capital to redeploy investment into its core business of growing natural gas and liquids production, he says.

"As part of our midstream divestiture approach, we enter into competitive, long-term gathering and processing fee agreements with top-tier midstream firms on terms that provide cost stability for our ongoing natural gas developments," he says.

These Piceance basin midstream assets serve Encana's Mamm Creek, Orchard and South Parachute production in the region around Rifle, Colorado, about 180 miles west of Denver. The assets gather and transport 500 million cubic feet per day, and include about 260 miles of pipeline and 90,000 horsepower of compression facilities. The sale of the Piceance basin midstream assets is expected to close in fourth-quarter 2011.

"Once we have completed the Piceance midstream asset sale, our 2011 net divestitures will stand at about $600 million," he says. Encana's total divestitures proceeds of about $1 billion are offset by about $400 million of acquisitions.

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