The value buyers now place on various reserves categories has changed dramatically from a few years ago, says Jefferies & Co.’s Bill Marko. At the peak, companies would pay 100% of the PDP at a low discount rate (typically between 8-10%), for behind pipes nearly 100%, for a good portion of the PUDs, and they might even pay for the probables and possibles.
When the market bottomed out a year ago, however, sellers were only getting paid for the PDP component. “That’s where the buyers adjusted,” says Marko. “They were not willing to take much risk beyond PDP.”
That is starting to change. “We’ve seen some decently aggressive oil deals lately. People are starting to pay more for value beyond PDP.”
While A&D activity has trended up, the return has been slower than he anticipated. Most deals in second-half 2009 involved shale or oil, and many were “do-overs” from broken deals in late 2008, such as Denbury Resources’ acquisition of Conroe Field assets, and several divestitures by Forest Oil.
Unease over gas prices will stifle gas-weighted deals over the next year, he anticipates. “They’re still worried about over supply, but you’ll see some deals.”
Noncore exits will come to the forefront, such as recent packages offered by St. Mary Land & Exploration, Encana and Forest. “Others will come to market where companies are cutting costs. And a lot of shale-focused companies are trying to sell their nonshales.”
2010 will involve big companies taking positions akin to ENI’s quarter-billion dollar deal in the Barnett to ExxonMobil’s $41-billion buyout of XTO Energy. “We’ll see everything in between,” he says.
Joint ventures will continue to be popular, and farm downs in the deepwater Gulf of Mexico will proliferate.
“It will be a good year for A&D.”
Recommended Reading
EOG Testing 700-ft Spacing in Ohio’s Utica Oil Window, Sees Success
2024-08-05 - EOG Resources’ test at the northern end of its 140-mile-long north-south leasehold produced IPs similar to those from a nearby pad.
Where, When and How to Refrac—Weighing All the Options
2024-07-12 - Experts weigh in on strategic considerations when deciding how to rejuvenate production from a tired well.
Beetaloo Juice: US Shale Explores Down Under
2024-06-28 - Tamboran Resources has put together the largest shale-gas leasehold in Australia’s Beetaloo Basin, with plans for a 1.5+ Bcf/d play. Behind its move now to manufacturing mode are American geologists and E&P-builders, a longtime Australian wildcatter, a U.S. shale-rig operator and a U.S. shale pressure-pumper.
Goodbye Manual Control: Vital Energy’s Automation Program Boosts Production
2024-07-12 - Production, ESP efficiency soared when the company automated decisions with AI at the edge.
Vista to Import New Fracking Set to Boost Production at Argentina's Vaca Muerta
2024-06-11 - Vista Energy will import a new fracking set in the Vaca Muerta and sealed an agreement with SLB for the new equipment.