- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
WSJ: U.S. Oil Land Grab Continues (Each Barrel Gained via Acquisition to get Pricier)
Posted on 12/1/23 at 4:04 pm
Posted on 12/1/23 at 4:04 pm
I hated the title given by the WSJ, as it seemed to me to imply oil companies were gobbling up actual land, rather than leasehold and production. Hence my added parentheses bit.
LINK
One thing is certain. The Permian Basin is hot and heavy. It was just three short years ago oil executives and financial “experts” alike were talking about industry having to figure out how to make money in a sustained $40-50 per barrel environment. Things have certainly changed.
quote:
It’s a seller’s market in the U.S. oil patch.
Occidental Petroleum OXY is in talks to buy CrownRock, one of the last remaining private companies of scale in the Permian basin, The Wall Street Journal reported on Wednesday. If the deal goes through, it would be the latest in a string of mergers and acquisitions this year, including Exxon Mobil’s $64.5 billion purchase of Permian giant Pioneer Natural Resources.
The Journal report said the deal could be valued at “well above $10 billion” including debt. CrownRock produces nearly 150,000 barrels of oil equivalent a day, according to Fitch Group. Even assuming a conservative price tag of $11 billion, it implies Occidental would be shelling out at least $73,000 per flowing barrel of oil equivalent a day for CrownRock.
That pricing looks steep compared with other moderately sized Permian deals inked this year. Notably, Ovintiv in April agreed to pay about $65,000/boepd for Permian basin assets from private equity firm Encap, according to an estimate from Bison Interests, an energy investment firm. Civitas Resources’s Permian deal from earlier this year implied a $47,000/boepd valuation, according to Bison’s estimate. Exxon forked over $91,000/boepd for Pioneer, though arguably Exxon was paying up for Pioneer’s vast undeveloped acreage—something the per barrel metric doesn’t capture.
Not that Occidental is averse to paying up. The company famously outbid Chevron to buy Anadarko Petroleum in 2019—a deal that seemed reckless back when oil prices plunged in 2020 but has paid off handsomely. Occidental was the top performer in the S&P 500 in 2022 and the company is in a much better spot financially now, having shed some $30 billion of long-term debt since its post-acquisition peak.
The current oil market isn’t particularly supportive. Prices declined even after OPEC+ announced a further production cut on Thursday. Meanwhile, investors haven’t rewarded companies for making acquisitions, as evidenced by the lukewarm reception to Exxon and Chevron’s deal announcements.
Still, the shrinking pool of acquisition targets and the market’s discount on small producers should provide enough motivation for consolidation. An index that is heavily weighted toward Exxon Mobil, Chevron and other large producers is 43% more expensive than an index tracking smaller producers, based on enterprise value as a multiple of forward-12-month earnings before interest, taxes, depreciation and amortization. Any company that can be “bite size” for another company is in a good position, notes Dan Pickering, chief investment officer at Pickering Energy Partners. Large Permian-focused bites include Diamondback Energy, while smaller targets include Matador Resources, Permian Resources and Callon Petroleum.
This game of musical chairs is only bound to get more intense. Whoever wants the next seat will have to pay up.
LINK
One thing is certain. The Permian Basin is hot and heavy. It was just three short years ago oil executives and financial “experts” alike were talking about industry having to figure out how to make money in a sustained $40-50 per barrel environment. Things have certainly changed.
Posted on 12/1/23 at 4:29 pm to ragincajun03
Boom or bust. All these companies are reckless during the booms and shortsighted during the busts.
What everyone needs is exploration to pay off. Seems like everyone has been struggling in that area for a while. In the US at least.
What everyone needs is exploration to pay off. Seems like everyone has been struggling in that area for a while. In the US at least.
Posted on 12/1/23 at 4:44 pm to FOBW
Ok. Surely you know better than the entire braintrust of multi-billion dollar companies lol! Check yourself
Posted on 12/1/23 at 4:57 pm to ragincajun03
$/bbl/day? Brb let me just get my pet. E for decline curve analysis
Also no mention of existing leaseholds and potential recompletions, such lazy writing
Also no mention of existing leaseholds and potential recompletions, such lazy writing
This post was edited on 12/1/23 at 4:59 pm
Posted on 12/1/23 at 6:29 pm to FOBW
quote:
Boom or bust. All these companies are reckless during the booms and shortsighted during the busts.
What everyone needs is exploration to pay off. Seems like everyone has been struggling in that area for a while. In the US at least.
Quite the opposite the last several years. After the price collapse due "two weeks to flatten the curve" they all lost their butts, and before that in 2014. Since then they've paid down debt and bought back stock. They have been sitting fat for at least a year, flush with cash.
Posted on 12/1/23 at 6:33 pm to CitizenK
quote:
CitizenK
ur avatar just broke my browser
Posted on 12/1/23 at 6:43 pm to CitizenK
quote:
Quite the opposite the last several years. After the price collapse due "two weeks to flatten the curve" they all lost their butts, and before that in 2014. Since then they've paid down debt and bought back stock. They have been sitting fat for at least a year, flush with cash
It’s been pretty impressive to see how quickly the industry has adapted once the capital markets put the squeeze on them. I just hope things don’t flop in the other direction again. Over-bloated energy isn’t good for anyone.
Posted on 12/1/23 at 7:28 pm to FOBW
Baw half of these financed via stock; limited increase in leverage, operational synergies,
Posted on 12/2/23 at 10:50 am to FOBW
quote:
All these companies are reckless during the booms and shortsighted during the busts.
This round of industry consolidation is not about production growth. It is about inventory. Inventory is getting more expensive because, as you noted, exploration efforts in countries one feels confident they will get their money out of are not going that great.
Re: exploration, it is long cycle and so hard to accurately predict ROR. Investors want short cycle, higher margins / returns, in countries one can feel confident about.
Posted on 12/2/23 at 10:55 am to FOBW
quote:
Boom or bust. All these companies are reckless during the booms and shortsighted during the busts.
I’m the past yes, but not this past boom. HAL, SLB, and Baker have all been exceptionally disciplined with capital expenditures, choosing to repair and redeploy fleets versus replacing them unless a truly differentiating technology presented itself.
These companies have listed to Wall Street and look to be much better prepared come the next down turn.
Posted on 12/2/23 at 11:09 am to Oilfieldbiology
quote:
I’m the past yes, but not this past boom. HAL, SLB, and Baker have all been exceptionally disciplined with capital expenditures
People are usually talking about the E&P companies when they say that. They were the ones vaporizing capital left and right.
Posted on 12/2/23 at 11:20 am to Corinthians420
Kinda awesome tbh. He found a glitch in the matrix.
Posted on 12/2/23 at 12:23 pm to ragincajun03
If government got out of the way, we could be independent and not need China or the 9-11 Saudis. But, that doesn’t making the swamp class money.
Posted on 12/2/23 at 12:42 pm to Northshoretiger87
quote:
we could be independent and not need China
What does this mean?
Posted on 12/2/23 at 1:17 pm to notiger1997
quote:
we could be independent and not need China
re: energy or supply chain? If supply chain, do you mean less regs, make it cheaper, race to the bottom stuff?
Posted on 12/2/23 at 1:22 pm to Northshoretiger87
quote:
government got out of the way, we could be independent and not need China or the 9-11 Saudis. But, that doesn’t making the swamp class money.
Did you read this on the Facebook?
Posted on 12/2/23 at 1:50 pm to billjamin
quote:Some of it is smoke and mirrors. If they went pedal to the metal like the old days, they'd be out of Tier 1 inventory in like 5 months. They do no want the market digesting that very quickly.
It’s been pretty impressive to see how quickly the industry has adapted once the capital markets put the squeeze on them.
Popular
Back to top
Follow TigerDroppings for LSU Football News