?The factors that motivate oil and gas property owners to sell their assets are as varied as there are sellers. Not only do potential sellers have to determine what and when to sell, but the options of how to sell have become more critical to achieving the true, maximum market value.
During the past decade and a half, auction has become a widely accepted and successful method of divesting noncore and “tail” assets. As that means of divestment has grown in acceptance by the industry, the type of assets offered for sale has changed too.
Higher-value properties, ranging from $1- to $15 million in value, are now commonplace at The Oil & Gas Asset Clearinghouse auctions, and oil and gas property owners are re-thinking their traditional divestment strategies. The age-old divestiture strategy of simply lumping everything together that was to be sold and finding a single buyer has given way to strategic selling. In some cases, creative ideas of how to maximize the value of a seller’s assets have been employed.
An Anadarko Petroleum Corp. lease sale earlier this year resulted in the granting of 24 new leases covering fee minerals owned by Anadarko, primarily in the Fayetteville shale fairway in Arkansas, with a total lease bonus of more than $82 million. Some leases were granted for well over $11,000 per acre, and the event was considered a huge success.
This lease sale has caused numerous companies to reconsider the manner in which they handle new lease requests. Many are considering simply aggregating new lease requests over the course of a month or more and offering leases on the acreage in regularly scheduled auctions on a competitive basis rather than negotiating on a “one-off” basis.
Another recent example of creative selling was an offer of 14 overriding royalty lots in the prolific Jonah Field in Sublette County, Wyoming.
Rather than sell the entire package as a single offering, an overriding royalty was divided into lots that varied in interest size, but all consisted of an undivided overriding royalty interest in approximately 993 wells and more than 30,000 gross and net acres.
Instead of one package and one buyer, the 14 different lots were sold for a total of $41.6 million to nine buyers for prices ranging from $1.25- to more than $5 million. The total of all bids amounted to a 107-month multiple of the past-five-month trailing-average of cash flow through August 2008.
During the past few years, numerous sellers have embraced the concept that “the sum of the parts is greater than the whole” and employed it by taking assets in a single field, breaking the wells into logical smaller packages and auctioning them to multiple buyers. Multiple bidders often become more aggressive for specific assets that are more critical and, thus, more valuable to them. As a result, the overall value for the seller increases, and the number of buyers also increases.
—Ken Olive (281-873-4600),
The Oil & Gas Asset Clearinghouse
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