North American Shale Plays Attract Big Guys
Hello, Majors: North American Shale Plays Attract Big Guys Seeking Big Reserves
September 10th, 2008 stoon Posted in Uncategorized |
The majors are coming back onshore North America. That’s been the theme with several recent conversations and presentations.
Two major integrated players are already in the fray. The U.K.’s BP Plc. planted its feet firmly in the Fayetteville and Woodford shales in two deals from Chesapeake for $3.7 billion. And The Netherlands’ Royal Dutch Shell through subsidiaries made a big wave in British Columbia with a $6-billion purchase in the Montney shale and has accumulated 325,000 net acres in the Haynesville shale in a joint venture with EnCana Corp.
Every single major is now coming through A&D data rooms, according to RBC Richardson Barr’s Scott Richardson. The global sandbox has gotten so small with challenges in oil-rich regions such as Russia, South America and West Africa that the majors have to come back onshore North America where it is politically secure.
“We’ve seen BP and Shell make a lot of acquisitions this year in the U.S. We’re going to see all of them. That’s a theme we’re going to see for the next couple of years.”
That these two majors are in the top five U.S. acquirers this year is momentous, says Bill Marko, managing director of Jefferies Randall & Dewey. These fall in behind XTO Energy, Plains Exploration & Production and Chesapeake Energy in a ranking that includes land acquisitions and lease sales.
“The majors are coming back to the states for lots of reasons,” he said, which encloses a circular asset food chain. “The majors used to set the food chain. When they were exiting they created the market and the supply of properties. Now they are buyers as they re-enter the U.S.”
The bait? Large reserves in North American shale plays. “All the majors are looking at the shales really hard.”
And should the majors decide to jump into shale plays feet first, existing companies with large positions that have executed their programs may be ripe targets. “That makes them potentially very attractive partners or attractive acquisitions if majors can value the upside enough to pay a premium to cause a deal to happen.”
“It’s going to encourage the smaller and capital-constrained companies to either sell out or be merged into someone else,” predicts Rob Bilger, managing director of Tristone Capital. “The larger companies in the plays already will be consolidators, but some of the majors may see this as the opportunistic way to re-enter North American gas plays in a big way.”
The Oil & Gas Asset Clearinghouse’s Ken Olive says it wouldn’t surprise him to see another round of corporate takeovers. “A number of large independent companies have set themselves up to be takeover candidates.” Possibly by majors? “It wouldn’t surprise me. They’ve recast themselves as resource type players that would be attractive to large cap companies.”
Large cap companies tend to follow similar strategies, he says. When BP moves into a play, “I guarantee that causes other large caps to start looking around and ask ‘Where could we acquire a large shale position and bring our technology to bear through an asset or a corporate deal?’ You’ll see some large caps taking a hard look at these shale plays to try to bring their balance sheet as well as their technology to bear.”
Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com
September 10th, 2008 stoon Posted in Uncategorized |
The majors are coming back onshore North America. That’s been the theme with several recent conversations and presentations.
Two major integrated players are already in the fray. The U.K.’s BP Plc. planted its feet firmly in the Fayetteville and Woodford shales in two deals from Chesapeake for $3.7 billion. And The Netherlands’ Royal Dutch Shell through subsidiaries made a big wave in British Columbia with a $6-billion purchase in the Montney shale and has accumulated 325,000 net acres in the Haynesville shale in a joint venture with EnCana Corp.
Every single major is now coming through A&D data rooms, according to RBC Richardson Barr’s Scott Richardson. The global sandbox has gotten so small with challenges in oil-rich regions such as Russia, South America and West Africa that the majors have to come back onshore North America where it is politically secure.
“We’ve seen BP and Shell make a lot of acquisitions this year in the U.S. We’re going to see all of them. That’s a theme we’re going to see for the next couple of years.”
That these two majors are in the top five U.S. acquirers this year is momentous, says Bill Marko, managing director of Jefferies Randall & Dewey. These fall in behind XTO Energy, Plains Exploration & Production and Chesapeake Energy in a ranking that includes land acquisitions and lease sales.
“The majors are coming back to the states for lots of reasons,” he said, which encloses a circular asset food chain. “The majors used to set the food chain. When they were exiting they created the market and the supply of properties. Now they are buyers as they re-enter the U.S.”
The bait? Large reserves in North American shale plays. “All the majors are looking at the shales really hard.”
And should the majors decide to jump into shale plays feet first, existing companies with large positions that have executed their programs may be ripe targets. “That makes them potentially very attractive partners or attractive acquisitions if majors can value the upside enough to pay a premium to cause a deal to happen.”
“It’s going to encourage the smaller and capital-constrained companies to either sell out or be merged into someone else,” predicts Rob Bilger, managing director of Tristone Capital. “The larger companies in the plays already will be consolidators, but some of the majors may see this as the opportunistic way to re-enter North American gas plays in a big way.”
The Oil & Gas Asset Clearinghouse’s Ken Olive says it wouldn’t surprise him to see another round of corporate takeovers. “A number of large independent companies have set themselves up to be takeover candidates.” Possibly by majors? “It wouldn’t surprise me. They’ve recast themselves as resource type players that would be attractive to large cap companies.”
Large cap companies tend to follow similar strategies, he says. When BP moves into a play, “I guarantee that causes other large caps to start looking around and ask ‘Where could we acquire a large shale position and bring our technology to bear through an asset or a corporate deal?’ You’ll see some large caps taking a hard look at these shale plays to try to bring their balance sheet as well as their technology to bear.”
Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com
Views: 75
Replies to This Discussion
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Permalink Reply by Skip Peel - Mineral Consultant on
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Jim, I hope for much leavings to go around. And late arrivers to pay to play. I have been toying with an idea for an organization chart showing working relationships between operators. The Goodrich announcement of the Hall 9-1 the other day got me to thinking about a way to keep up with the interconnections. The well was not listed on SonRis under Goodrich, so I tried Cheasapeake and then it was pointed out to me that it was listed as Matador. Do you think there would be utility and interest in assembling a chart?
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Permalink Reply by Skip Peel - Mineral Consultant on
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Jim, I was aware of the Encana/Indigo connection but had not thought about the possibility that a hand full of private landowners might end up with the power to determine the operator. I'd like to be a fly on the wall at those negotiations. Or, better yet, be the landowner. And yes, I find it quite easy to believe that you have tracked M&As. When I read your reply to the posted article, I thought you would be a good member to give me an opinion. It sounds like you may already have a comprehensive list. I am more than willing to help if needed but I think the members could build that flow chart in no time. I think it would help in a number of instances. Skip
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Permalink Reply by Skip Peel - Mineral Consultant on
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Jim, it gives a whole new reason to be in the timber business. Just when things in the industry are going south, it turns out the real value was below the surface, not on it. The large timber companies, or their subsidiaries controlling their mineral interests, may have cashed out but there have got to be a lot of smaller, independents still out there wondering how they might do the same. What do you think of the flow chart idea? Skip
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Permalink Reply by Skip Peel - Mineral Consultant on
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Jim, the "crack head" comment in regard to "farmers having to farm", "cracks me up"! Usually signified by "lol" by the members. No offense to the farmers out there. We're just joking around here. But seriously, the "carbon tax credit" thought is an excellent one. I don't know if anyone viewing this thread will agree but I think it is an idea worth exploring. Time will tell. Do you have any thoughts on how to begin the flow chart compilation process? I would like the finished product to end up in diagram form in the Photos section so that it can be printed and we can all have a copy close at hand as we research and discuss the Play. So you were in college with Harmon, huh? Regards, Skip
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Permalink Reply by Grillin' - MmmMmm on
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COP took a different approach. Bought Burlington Resources a couple of years ago for $36 billion and just finalized a deal in Australia for unconventional gas...coal bed methane...for $8 billion. You gotta admit, sipping a Foster's on the beach in Australia sounds a tad bit nicer than drinking a Miller Lite in Shreveport! I lived many years in S'port so no dis meant...Australia though.......
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Permalink Reply by Skip Peel - Mineral Consultant on
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Jim, I can not find a "Reply to this" link to your last post in regard to my post about "farmers", so I am responding here. My initial thought was to connect the E&Ps as to their joint venture relationships. Your idea to include "acreage count" as well as "capital invested" is, well, capital! A tool that I think many members will find useful if not invaluable. I am more than willing to contribute but suspect that you already have the pertinent information required. Others may have additional information to contribute. I would encourage you to get the ball rolling at your convenience. Thanks for all your insightful posts and willingness to share. You, among others, make this site the place to turn to for real time and reliable HS information. Thank you. Skip
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