2014 US upstream oil and gas acquisition & divestiture activity will be…. unpredictable.
How’s that for a stake in the ground?
The unconventional market whirlwind from 2011 and 2012 – seeing high levels of acquisition activity in the unconventionals – gave way to a much slower market in 2013. Apparently, the major buyers were satisfied with their positions, and busy building development plans and drilling programs on the acreage they acquired.
On the other hand, there are new “major” buyers entering the scene, as well as “twice” traded assets that first time buyers are just not capable of consuming fast enough.
Soooo where do we go in 2014?
What we do know:
Industry-wide, the last two years saw approximately $90 Billion spent on acquisitions, with 2013 being half as much as 2012. Drillinginfo’s online marketplace shaped up like this:
The deals ranged from raw acreage in prospective unproven areas to large drill-ready in fill development projects.
- There is a large audience scouring the US for deals in producing areas with unconventional upside.
- There are a large number of deals on the market — at full price, waiting for the right buyer
- Deals are being evaluated in more depth, which requires more development from sellers in order to get paid for the “upside”
- There is an immense inventory of drilling locations in known unconventional plays
- Conventional plays that had gone out of style are coming back in areas that have not been priced out due to an unconventional.
- There is a lot of money out there looking for the “right deal”
Everyone in the entire A&D market is looking for the same thing – upside that others don’t see. How do you do that? Be creative, see the deals that are on the market, and evaluate quickly.
How Drillinginfo can help
Unconventional development has forever altered the pace at which acreage can go from $100/acre to $10,000/acre (it happened!) and brought a global level of attention like never before. In this new world of the Onshore US, the A&D market has gone through some wild swings. There is a large “market” for deals, but also lots of additional production data to evaluate. It seems every known deal is getting evaluated by a large number of potential buyers, but the volatility and evaluated risk has put price and purchase at odds.
This road block will be broken by more transparency between buyers and sellers. Those that are able to communicate faster will have a competitive advantage. As with other industries, in the coming years we will see new transparencies and standard buying processes (such as the CarFax report when buying a used car). Those that adapt will improve their chance of success.
DI Marketplace 2014
We provide tools to help our clients expose deals they wish to divest to a large number of potential investors. For buyers, we provide the data and analytics to identify and evaluate deals quickly. In early Q2 2014 we will launch the next generation of DI A&D making it even easier to enter and evaluate deals along with tools to quickly connect buyers and sellers. We’ll streamline meaningful communication resulting in a higher rate of successful transactions. DI will be a central hub for A&D activity research, analysis, and networking.
During 2013, we received a lot of very positive feedback and encouragement about Marketplace. One example was a VP Business Development at a US Independent E&P company who was working to divest 4 different properties and attended all deal shows.
“After I listed my deal on DI A&D, I got 4 phone calls within the first week from people who had seen the deal online.”
Back to the Future of Upstream Oil and Gas A&D
2012 was the year of large transactions, 2013 was the year of digesting, could 2014 be the year of divestitures and JV’s? There are a lot of companies with more drilling locations than they will get to in 20 years – it may be time to start seeking strategies for faster monetization of assets – developing beyond your current capacity requires tools, data, and expanded workforce.
What do you think? How do you currently identify deals? What can we do to help? Leave a comment below.
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