Despite the precipitous drop in oil prices to close out the year, 2018 set records for U.S. upstream oil & gas M&A activity. The total: $84 billion – the highest since oil prices fell from their peak in late 2014, fueled by a record-setting $32 billion in Q3. That was 76 percent above the quarterly average since 2009. While it’s unlikely 2019 will be another record-setting year, it definitely won’t be quiet. The New Year was just a week old when hedge fund Elliott Management Corp. announced its offer to buy QEP for $2.07 billion.
Private and institutional capital is still highly active in the upstream business, and the Elliott-QEP transaction signals that PE capital is ready to move whenever it feels public markets are undervaluing assets or companies.
Last month we launched our Executive Deal Summary platform, which produces a concise yet detailed analysis of a significant transaction no more than 48 hours after it’s announced. The Elliott-QEP transaction made headlines on Jan. 7, and two days later the Executive Deal Summary publication was ready.
The cover slide provides a detailed transaction summary, and you can see why Elliott finds QEP so attractive. The $8.75/share cash offer price represents a 44 percent premium to QEP’s prior day closing price but is 35 percent below its 52-week high of $13.37/share in July 2018 and below where it was trading in mid-November 2018. Yet QEP shares have been trading at an enterprise value per BOE of proved reserves of $6.77, far below pure Permian producers such as FANG ($23.76/BOE), PE ($18.45/BOE), and PXD ($26.25/BOE).
Slide 1 summarizes the agreement terms, asset highlights, and features a map that shows where QEP’s assets are located across the 50,700 net acres in Texas’ Martin, Andrews, and Crockett Counties.
Before we continue, I want to call your attention to the bottom right-hand corner of the slide, where you’ll find the Drillinginfo, 1Derrick, and PLS logos. Executive Deal Summary represents the power of the first true integration of Drillinginfo along with PLS and 1Derrick data and analysis since we acquired both companies in 2018. Every Executive Deal Summary publication draws data from the enormous virtual vault of historical data that includes more than 2.5 million source slides in the combined library of all three companies, as well as from current market data.
I’ve said it before and it’s worth repeating: no other company can build such an enormous library from scratch or match the speed at which we can deliver an analysis of a significant new deal that incorporates historical data including production, rigs, and leases.
Slide 2 shows the historical transactions and assets on the market. Elliott is offering QEP $2.55B or $11,415/acre – well below the past market price for deals in core Midland Basin.
Slides 3 and 4 show color-coded maps of Initial Production (30-day Average) and Initial Production (24-hr). Notice that the Initial Production (30-day average) includes direct links to relevant source documents in our database. Additional information is available with quick click hyperlink access to the M&A database on each slide.
Slide 5 draws from our Private Equity Database to show private equity-backed operators around this transaction and identifies each PE company along with its commitment and fund year. It includes links directly to the PE database which has detailed information on operators’ strategies, executive team summaries, and primary operational and M&A focus. The map shows all the players – notice this is not Elliott’s first foray into this region.
Slide 6 pinpoints all active rigs and recent permits around the Elliott-QEP transaction sorted by operator. Exxon is the most active operator with 10 active rigs and 30 permits in the vicinity of the transacted acreage. QEP, Concho, Endeavor, and Diamondback all have at least four active rigs and 30+ active permits to be drilled.
Slides 7-9 break down the type curves and leasing information.
We launched Executive Deal Summary less than a month ago, and it’s very exciting and gratifying to see it prepare such a detailed publication so soon after the Elliott-QEP transaction was announced. Executive Deal Summary is unique in its ability to quickly compile such detailed reports that our customers can use to quickly source and analyze the most critical factors of a deal.
Executive Deal Summary is available now at no additional cost to all subscribers of the new Drillinginfo M&A database. For more information, click here. Executive Deal Summary will be a key feature of our new Drillinginfo M&A Dealmaker Platform which we will launch this year.
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