Recap: NAPE Crowds ‘Resilient’ Through Tough A&D Times

HOUSTON—Known as the event where deals happen, the exhibit floor at the 2020 NAPE Summit buzzed with what Will Cullen, vice president of LongPoint Minerals LLC, described as a “resilient spirit” despite the fog of tough A&D times for upstream oil and gas dealmakers.

Cullen, who spoke with Hart Energy at LongPoint’s booth on the NAPE show floor in Houston, said he noticed a shift toward problem-solving among this year’s conference attendees, which ended up totaling more than 11,000 oil and gas professionals.

“Certainly, there’s a tempered enthusiasm with the current backdrop of limited capital and down commodity, but folks are still trying to figure things out,” he said of the event held annually in February at the George R. Brown Convention Center.

With this year’s tagline of “Find Your Focus” on purple signs every few hundred feet, thoroughfares thick with foot traffic led to roughly 700 exhibitor booths. Attendees took pathways to the latest software offerings, auction houses, E&Ps, mineral buyers and, of course, sporting clay clubs.

Some came to pitch prospects, others to promote their companies, and some hunted deals. 

Amid the sprawling affair, a booth for Denver-based Ovintiv Inc. caused some confusion among conference-goers. Ovinitiv business development staff patiently explained that the company had previously been Canada’s Encana before officially changing the name with a vote of shareholders on Jan. 14.

The rebranding effort extended to the company’s swag, including a nifty hand sanitizer bottle that was conveniently flattened for less bulky carrying. Despite those efforts, some of the company’s acquisitions staff had to autocorrect more than once, stammering out “Encana—Ovintiv” as they discussed the company’s leasehold.

Attracting more acute attention, Quorum Software offered NAPE crowds the chance to win an Iron 883 Harley Davidson motorcycle. Many attendees were also mesmerized by a replica of a 1965 Shelby Cobra.

Tucked into a NAPE nook, BoomTown Oil LLC competed with its own “Oilfield Mafia” stickers and a poster board showing the company’s assets in the Eagle Ford and Denver-Julesburg Basin.

As he touted BoomTown’s Wyoming acreage, Christian Walters, vice president of land and business development, said a lot had changed since he first attended the annual gathering.

Today, it’s more formal and workmanlike than when he first began attending.

“My first NAPE was 2006,” he said. “Back when it started, we had a lot of stuff to do. A lot of stuff to enjoy.”

Fourteen years and four children later, Walters said the rowdy years of the past had given way to “the better, upscale executive” conference, he said, laughing.

“It’s been a great thing to enjoy,” he said.

Coming off a slow year of A&D activity, dealmaking for the upstream oil and gas industry in 2020 has been projected to more or less stay the same with a few bright spots.

In an interview over coffee at NAPE, Andrew Dittmar, senior M&A analyst with Austin, Texas-based Enverus, told Hart Energy he sees A&D to continue to be challenging for the year ahead, citing the continued lack of capital and investor enthusiasm for acquisitions.

However, sellers have readjusted their expectations on some pricing, which might improve the bid-ask spread, he said.

“At least compared to past years, prices in some pretty premier areas look relatively moderate,” he said. Using the Delaware Basin as an example, he added that he is seeing core acreage transacting for half or a third of what was paid for in 2017.

“If you are a buyer out there, I think there’s some opportunities available provided you can get capital to take advantage of them,” he said.

At the EnergyNet booth, located front and center on the NAPE show floor, Denna Arias, vice president of corporate development for the asset marketing firm, told Hart Energy she’s hearing hopefulness among attendees that transactions will pick up.

She added that EnergyNet, headquartered in Amarillo, Texas, has also started preparing for a potential ramp up in A&D in 2020.

“We are going to be ready to increase, just to keep growing up market and increase our technical abilities and what we can offer our clients both on the buy- and sell-side,” she said.

One trend Cullen said LongPoint Minerals started to see take shape near the end of 2019 is larger mineral packages being brought to market.

“We’re going to start to see more of these bigger packages either by somebody who aggregated it a while ago or just large mineral owners [or] landowners that no longer can just sit on the sidelines,” he said.

Cullen said this year LongPoint Minerals is looking to expand into the Eagle Ford Shale. The Denver-based company, founded by the management team of privately held FourPoint Energy, currently focuses in two primary basins: the Eastern Anadarko and Permian.

“We’ve done a lot of technical work there,” he said of the Eagle Ford. “We haven't done a deal there yet, but I think that’s going to be a place we’re going to target and try to get after this year.”

PetroValues Inc., an online oil and gas marketplace based in Denver, is also seeing an increase in minerals and royalties transactions.

“What we’re seeing is a lot of nonoperated working interest investors are shifting toward investing in minerals and royalties because there’s less risk,” Eric Thompson, vice president of business development at PetroValues, told Hart Energy at the company’s NAPE booth.

For the first time ever, one-fourth of the total asset deal value in 2019 U.S. M&A came from royalty or joint development agreements, according to a recent report by Deloitte LLP.

Enverus’ Dittmar described minerals as one of the brightest spots of the oil and gas industry.

“Minerals show they can deliver in terms of cash flow so I think there's a lot of a lot of positivity around that piece of the industry,” he said.

Unlike E&P asset market, the minerals acquisition space is drawing interest from several buyers, according to Dittmar, ranging from royalty public companies, private equity backed companies, E&Ps and institutional capital.

“You’ve got a very diversified group of buyers in that space so capital is coming in from other areas where money is still available,” he said.

After a tough year in A&D, Arias said the oil and gas industry are naturally finding their way in a turbulent market.

“Of course, everyone is kind of uncertain of pricing,” she said. “But they’re hopeful with the New Year, new decade that things are coming to market.”