Prices for U.S. oil and gas reserves continue to strengthen-one producer plans to pay an eye-popping $100,000-plus per flowing barrel of oil equivalent (BOE). And at press time, a deal was announced for Gulf of Mexico reserves for some $3.40 per proved thousand cubic feet equivalent (Mcfe). In the former deal, newly public, Denver-based Whiting Petroleum Corp. is paying some $100,000 per flowing BOE for Midland-based Celero Energy LP's approximately 8,000 BOE per day of production in the Permian Basin and Oklahoma Panhandle. The deal comes with some 734 billion cubic feet of gas equivalent (Bcfe) of proved reserves, making the price per proved Mcfe look more comfortable: $1.09. In the latter, Denver-based Forest Oil Corp. has agreed to sell its 344 Bcfe of Gulf of Mexico reserves to soon-to-go-public, Houston-based Mariner Energy Inc. for essentially $3.40 per proved Mcfe. In the deal, Forest shareholders will get 0.8 share of Mariner per Forest share. Houston-based Randall & Dewey reports that first-half 2005 U.S. deal activity involved 120 transactions (18 stock, 102 asset) for a total of $21.2 billion ($9.9 billion stock; $11.3 billion asset). Deals in all of 2004 totaled $29 billion in value. Stock deals in first-half 2005 were at an average cost of $11.53 per BOE of proved reserves; asset deals, $12.97. The figures are the highest average price paid for as long as the firm has tracked the data-since 1990. The first-half 2005 figures are compared with the former all-time-high average that was set in 2004: $10.08 per proved BOE for stock deals and $9.03 for asset-only transactions. Despite the rising cost for assets, M&A advisors don't see deal-flow slowing anytime soon. Only a sharp change in the futures market-making both potential buyers and sellers skittish about deal price-could soften the pace of transactions. Meanwhile, buyers and sellers continue to have common expectations, says Bill Marko, a managing director with Randall & Dewey. "The buyers have kept pace with changing prices for assets, and they have been astute in evaluating and managing risk. Some time ago, potential buyers would have sat on the sidelines because commodity prices were volatile, but today they're staying in (the game)." For more on this, see the October issue of Oil and Gas Investor. For a subscription, call 713-993-9325 Ext. 126.

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