The Street Strikes Back: Oil & Gas Operators Shown No Mercy

Austin, TX (October 9, 2019) – Enverus, the leading oil and gas SaaS and data analytics company, has released The Street Strikes Back, a new report in its FundamentalEdge series focused on geopolitical and domestic impacts affecting the oil, natural gas, and NGL markets.

“Global incidents like the attack on Saudi oil facilities that used to send lasting ripples across the world and disproportionately harm the United States are now being dismissed,” said Bernadette Johnson, Vice President of Strategic Analytics at Enverus. “What used to trigger a major buy or sell in crude oil, or cause prices at the pump to skyrocket, are being shrugged off by the markets in a day,” she said. “Absorbing most of that impact is the Permian basin, which has since jumped to 40% of total U.S. oil production, but capacity and bottlenecks continue to be a major problem there. The good news is relief is on its way with several planned pipelines expected to come online soon,” she said.

“America’s energy story isn’t just about crude oil,” Johnson added. “Liquefied natural gas (LNG) exports set a record high during the summer of 2019, and our projections indicate they could nearly double from 5.0 Bcf/d to 9.0 Bcf/d by 2023. However, trade wars could certainly alter that anticipated future.”

“Also, Wall Street continues to keep a watchful eye on capital plans. This shift to generating free cash flow is reaching an inflection point for many, and with that brings reduced activity. Operators want to ensure positive cash flows exceed expenditures, which brings them one step closer to returning cash to shareholders or reducing debt,” Johnson said.

Enverus’ The Street Strikes Back is the 4Q2019 installment of its FundamentalEdge series. This market outlook service presents the company’s current view of the oil, natural gas, and NGL markets and where they are headed over the next five years.

Key Takeaways from the Report:

  • Crude markets found a brief moment of support after news broke of the September 14th attack on key Saudi oil facilities, with front month ICE Brent contracts rallying ~15% on the first trading day after the event. Backwardation in the Brent structure also briefly strengthened to more than $1.30/bbl in the prompt as it was announced that Saudi Aramco planned to fill the gap in its output by drawing down on inventories (much of which are held outside the kingdom). Markets have since shrugged off the attack’s impact on Saudi spare production capacity; prompt Brent futures are trading close to levels seen immediately before the attack, and the front spread has eased off of recent highs. Even with the steep production losses from Venezuela and Iran this year, physical markets remain well supplied. Preliminary data imply global petroleum stocks drew in the third quarter and stocks are expected to draw again in the fourth, but large supply/demand imbalances are in our outlook for early 2020 as total petroleum demand continues to soften and non-OPEC production ramps up further. Although U.S. tight oil production growth is ostensibly slowing with WTI trading in the mid-50s, production growth in Brazil and Norway will augment U.S. supplies and push non-OPEC crude and condensate production growth to 2 MM Bbl/d next year.
  • There were many developments in the natural gas market over the past months including the start of the first greenfield takeaway pipeline in the Permian, LNG exports set a record high during the summer, the start of a new pipeline export to Mexico, and strong production growth in the Marcellus and Haynesville. In 2019, supply gains have outpaced demand, causing natural gas prices to lose more than $1.00 per MMBtu, from $3.64 settlement in January to $2.43 in October. Enverus experts expect the price weakness to continue in 2020 with an average $2.60 per MMBtu. After 2020, prices are expected to return to $2.75 per MMBtu in order to allow natural gas production to grow at a rate that meets the expected demand growth.
  • During 2019, ethane and LPG prices have been depressed, mainly due to record or near-record levels of production and inventories. A slew of fractionation capacity is set to come online in the first quarter of 2020. However, recent storms and flooding along the Texas Gulf Coast near Mont Belvieu may delay some of these projects, possibly extending fractionation tightness along the Gulf Coast as y-grade production continues to increase, particularly out of PADD 3 and the Permian.
  • Operators were shown no mercy in Q2’19 earnings season. Infrastructure constraints and spacing issues caused sell-offs, while shareholder returns and free cash flow surprises continue to drive the gains. Most small to mid-sized operators are sticking to front half weighted capex programs, but lower prices did little to cause revisions to D&C plans for the remainder of the year.

Members of the media can download a 17-page preview of the full 50-page report, The Street Strikes Back, or contact Jon Haubert to schedule an interview with one of Enverus’ expert market analysts.

Members of the media may also request individual operator reports from Enverus’ recently released Operator Intelligence Suite. Please indicate the name(s) of the company or companies you are requesting.

U.S. Oil & Gas M&A Maintains Momentum in Q3 Despite Challenging Environment for E&Ps

Austin, Texas (October 2, 2019) – Enverus, the leading oil and gas SaaS and data analytics company, has released its summary of Q3 2019 deal activity and published a list of the Top 10 U.S. upstream M&A transactions. Despite a difficult market, M&A activity maintained the momentum established in Q2 surpassing $17 billion in Q3. That approaches the 2016-2018 historical quarterly average of $19 billion and puts year-to-date M&A at more than $85 billion.

“Most public E&Ps are highly limited in access to external capital right now,” said Enverus Senior M&A Analyst Andrew Dittmar. “Shale companies are turning to deals as another option in the toolbox to bridge the gap to free cash flow and hopefully shift market sentiment back in their favor. In contrast to prior years, where Permian asset deals dominated, we are seeing broad geographic diversity in the current market and a variety of deal types including joint ventures and royalties.”

Reaching into a region that has not often been at the forefront of deals, Hilcorp purchased BP’s Alaska business including its Prudhoe Bay and Trans Alaska Pipeline System interests for $5.6 billion in the largest deal of Q3. Since exiting an early investment in the Eagle Ford, privately held Hilcorp has been a countercyclical buyer of conventional assets. Meanwhile BP, a pioneer and major player in Alaska, is exiting to refocus U.S. operations on shale assets purchased from BHP.

The next largest Q3 transactions were a pair of corporate mergers. Early in the quarter, Callon Petroleum purchased Permian and Eagle Ford producer Carrizo Oil & Gas for $3.2 billion in an all equity/debt transaction. The deal has run into some investor opposition spearheaded by hedge fund Paulson & Co., who specifically cites the deal premium of 25%, and the addition of Eagle Ford assets to Callon’s Permian portfolio, as points of contention.

Dodging those issues and potentially setting the template for corporate consolidation, PDC Energy acquired fellow DJ Basin producer, SRC Energy, in a zero premium stock and debt deal for $1.7 billion. In a rarity for E&P deals in this market, both companies’ stock value moved up on the announcement as investors applauded the price and commitment to core DJ Basin operations.

“There is a broad consensus that corporate consolidation is positive for the industry,” added Dittmar. “While the benefits are there, getting the right deal in place is challenging. Companies that match up on asset fit are needed, as well as a low premium to avoid a buyer selloff. Conversely, targets have to be convinced on the long-term upside since an immediate payoff isn’t evident.”

Outside of corporate-level deals, there is very little buying from public companies. Private capital has partially stepped up, most significantly KKR-sponsored Spur Energy, which has deployed more than $1 billion including a $925 million acquisition from Concho targeting the New Mexico Shelf.

“Private equity looks to be largely sticking to their script from prior quarters and cautiously deploying capital on deals secured with significant cash flow,” commented Enverus Market Research Director John Spears. “There are ample opportunities. In a quick start to Q4, Oklahoma producer Roan Resources is being taken private by Citizen Energy, an affiliate of Warburg Pincus, for more than $1 billion consisting of ~77% debt assumption and ~23% cash to shareholders. We could see other small cap E&Ps with high debt and low share prices take similar buyout offers.”

While some public companies could announce all-stock acquisitions like Callon and PDC did in Q3, cash offers will likely need to come from the private market or the largest public companies, which still have substantial internally generated funds and high, investment grade credit ratings.

Low company and asset prices in the U.S. are also starting to draw interest from abroad. Japanese LNG importer Osaka Gas purchased East Texas gas producer Sabine Oil & Gas for a reported $610 million. A few days later, Colombia-based Ecopetrol signed a $1.5 billion joint development deal with Occidental targeting undeveloped acreage in the Midland Basin. While the Osaka deal was more narrowly tailored to source gas for LNG, the Ecopetrol JV shows that international companies view U.S. shale assets as competitive on a global basis. On a dollar-per-acre basis, the deal looks to have priced relatively in line with past Permian deal activity.

There were also a handful of Chapter 11 filings during 3Q19 including Halcon, Sanchez, and Alta Mesa. Thus far, the majority of Chapter 11 filings have ended in a recapitalization with creditors taking control of the company, but there could be a shift to more liquidations via bankruptcy sales processes as some lose patience and see companies going through multiple reorganizations.

Moving into the final quarter of 2019, public companies are likely to remain highly focused on keeping capex in check while maintaining moderate production growth to deliver on promised free cash flow. Investors will likely closely watch as 2020 capex guidance is rolled out to look for any inflation. Current company valuations show a strong investor preference for E&Ps with clean balance sheets and established capital returns from dividends or buybacks versus high growth. That may translate to little appetite for making acquisitions among most independent public E&Ps.

Click Here for additional detail on Q3 2019 Oil & Gas M&A activity.

Members of the media may also request individual operator reports from Enverus’ recently released Operator Intelligence Suite. Please indicate the name(s) of the company or companies you are requesting.

Grasping the Importance of Spacing and Parent-Child Well Relationships Emerging as Make-or-Break Distinction in Today’s Free Cash Flow Era

Austin, TX (September 24, 2019) – Enverus, the leading oil and gas SaaS and data analytics company, has released a new report in its FundamentalEdge series highlighting the importance of well spacing utilizing more than 300 comprehensive attributes in its calculations. Decisions on optimal well spacing are multidimensional and are a function of numerous geological, engineering, operational, and economic variables.

“Well spacing is complex and incredibly important in today’s current free cash flow era,” said Sarp Ozkan, Energy Analysis Director at Enverus. “As documented in this report and the case studies supporting it, understanding well spacing is like peeling back an onion. It is far more complex than something that can be understood by a single distance measurement. An inaccurate, simple spacing metric has ripple effects across all parts of the industry,” he said.

The report addresses some of the biggest challenges for U.S. onshore field development and points to various case studies indicating how proper spacing may result in less drilling, but more hydrocarbon production. Also, at the forefront of the industry, is the impact of parent-child well development and well interactions, raising questions about neighboring wells interacting with each other, potential degrading well performance, and offset well interference from newly drilled infill wells.

Key Takeaways from the Report:

  • Spacing is a complex problem. Solving it leads to optimal spacing within a drilling unit. Additionally, it is key to proper development of a particular formation in an area to get the highest per well returns and minimize productivity degradation and handle parent/child interactions.
  • Figuring out how to optimize well spacing to maximize productivity is an incredibly complex challenge. This changes from basin to basin, formation to formation, sometimes even section to section.
  • Understanding parent-child relationships and optimized spacing at a basin level is important to understand trends. It’s essential to get more granular and dive deeper to get the full picture and this requires a reliable, robust, and engineered dataset.
  • Enverus’ Well Spacing Solutions give the user the ability to dive through the most comprehensive Well Spacing dataset available. By combining geology, completion, production, M&A, and well placement and timing data sets rather than looking at well spacing metrics in a vacuum, Enverus reveals the important factors that impact operations and productivity.
  • The parent/child interactions, future field developments and inventory studies, cost savings through spacing pilot, and formation delineation programs must be mastered to facilitate operations excellence as well as deliver growth, cash flow, and returns for shareholders. Enverus’ Well Spacing Solutions is a comprehensive and technically robust well-spacing solution that can help companies navigate through all these challenges and drive value.

Members of the media can download the full 18-page Well Spacing & Case Studies or contact Jon Haubert to schedule an interview with one of Enverus’ expert market analysts.

Members of the media may also request individual operator reports from Enverus’ recently released Operator Intelligence Suite. Please indicate the name(s) of the company or companies you are requesting.

Enverus Unveils Operator Intelligence, Delivering ‘Unprecedented and Unparalleled’ Insight on 180 Oil and Gas Producers

Austin, TX (September 11, 2019) – Enverus, the leading oil and gas SaaS and analytics company, today unveiled Operator Intelligence — executive-level research reports covering hundreds of notable public and private upstream oil and gas operators. The new tool draws from Enverus’ world-class datasets to deliver benchmarking and trend analysis while telling clear, compelling stories that capture the nuance of each operator. Live, curated workspaces accompany the reports and enable readers to quickly dive deeper and interact with our broader Enverus Drillinginfo platform.

“Until now, there was no easy way to quickly access up-to-date, aggregated summaries of the hundreds of public and private E&Ps,” said Colin Westmoreland, Senior Vice President & General Manager of Market Research at Enverus. “Executives across the energy value chain have been asking for a high-value research product like this, and we’ve delivered. We’re excited to help the industry’s key decision makers by adding context to our differentiated datasets and providing faster answers to some of their most important questions.”

“Operator Intelligence offers objective analysis that can be digested quickly, without hardly any technology learning curve. All users need to do is enter a company name and launch a search. In one click or tap, they’ll have access to a full research report,” added Westmoreland.

Examples of questions answered by Operator Intelligence include:

  • Where, exactly, is an operator’s position located? How good is their acreage?
  • How was the position built? Were M&A transactions cheap or expensive?
  • What landing zones is an operator targeting? How does each perform relative to peers?
  • Is productivity improving or declining?
  • Have private equity-backed operators improved performance since acquiring and assuming operatorship of their assets?
  • How are operators changing behaviors, and why?

Andy McConn, the principal analyst behind Operator Intelligence, is excited to maintain the momentum, continue to evolve the product, and add value to our industry’s decision-making process. “A lot of compelling analysis easily falls out of Enverus’ powerful product suite, but we don’t intend to rest on our laurels with this first iteration. We’re excited to build out more forward-looking, economics-based research and get to the heart of our customers’ needs.”

Operator Intelligence sits inside a suite of other value-add products that work across several of Enverus’ platforms. The full suite of Operator Intelligence products will scale and evolve alongside Enverus’ broader analytics ecosystem and is the latest solution under the Enverus Drillinginfo business unit.

This two-minute video demonstrates how oil and gas executives can utilize the new Operator Intelligence tools from Enverus to obtain critical and timely information on more than 180 oil and gas producers.

Members of the media interested in a sample of Operator Intelligence should contact Jon Haubert with the name(s) of the company or companies they are requesting.

Enverus Boosts its Collection of World-Class Geology Solutions with Reservoir Visualization, Inc.

Austin, TX (August 28, 2019) – Enverus, the leading energy SaaS and data analytics company, announced today that it has acquired approximately 200,000 geological well datasets from Reservoir Visualization, Inc (RVI). The expansion quadruples Enverus’ interpreted well log catalog and is the first announcement since the company changed its name from Drillinginfo earlier this month.

Enverus’ products have earned a reputation for their strong scientific foundation and commitment to complete transparency. Today’s announcement follows a long line of investments in sub-surface expertise, including a recently released product pioneering well-spacing and parent-child relationships between wells, two of the most important topics in the oil and gas industry as operators transition from delineation to developmental drilling programs.

Fringe and infill areas of today’s most prolific basins, emerging plays, and specialty areas will all benefit significantly from these expanded datasets, as will the derivatives that are produced from this influx of additional data. As just one example, more landing zones and wellbore statistics of higher precision will expand Enverus’ geographical areas of coverage.

“Not all data are created equal,” noted Jimmy Fortuna, Senior Vice President of Products at Enverus. “RVI shares Enverus’ commitment to quality geologic interpretations as the basis for advanced analysis, making this acquisition an ideal fit for both companies. These assets are core to the work our customers are focused on, as well as instrumental in their field development plans. It’s a significant addition to our existing, robust geologic and engineering assets, and makes Enverus one of the largest interpreted dataset holders in the market,” Fortuna said.

“With the advent of powerful and inexpensive machine-learning technology, some have statistically modeled the subsurface using sparse datasets. Models produced using machine learning or statistical methods are only as good as the ground truth datasets used to train them. Sparse datasets fail to appropriately constrain the models that depend on them, and they also don’t realistically allow customers to improve the models with their own data and interpretations,” he said.

Producing large datasets is easy with these shortcuts, but producing precise ones is impossible.
Since its beginning, Enverus has always focused on transparency, whether a given data element is produced scientifically, and with the direct benefit of underlying ground truth, or if it is instead produced using a model that approximates values as accurately as possible using appropriate constraints from ground truth. In this manner, Enverus has recently expanded its landing zone coverage with the introduction of derived landing zones – which is separate from the company’s interpreted landing zones – a distinction most of Enverus’ competitors cannot claim to make.

“Our best-in-class training dataset produced by the ongoing interpretive work of geoscientists specializing in specific basins and using our proprietary Transform technology already placed us firmly ahead of our peers. This acquisition increases that lead substantially,” Fortuna said.

Enverus encourages existing customers to contact their account manager, and new customers to contact a sales representative via Enverus.com to learn how to request access.

Drillinginfo Announces Name Change to Enverus

Austin, TX (August 22, 2019) – Drillinginfo, the leading energy SaaS and data analytics company, announced today that it has changed its corporate name to Enverus. Marking both the company’s 20th anniversary and surpassing $300 million in Annual Recurring Revenue (ARR), the new name and brand better reflects the company’s identity as a leading data, analytics, and efficiency partner across the energy sector.

“Our company’s purpose is to create the future of the energy industry together in collaboration with our customers and partners. This is a larger mission than we began with and represents our evolution to becoming Enverus,” said Allen Gilmer, co-founder and visionary of the company. “I am so proud of our tremendous growth over the past two decades. We’ve never been better positioned to partner with our customers across the energy spectrum to help define its future. Now more than ever, we can deliver the most cutting-edge innovations to serve and fuel our industry’s leading innovators.”

“This business was started by ‘oilpatch kids’ in 1999 when the industry was on the cusp of both a massive digital revolution and a once-in-a-lifetime disruption from unconventional oil and gas. Over time, that team built a recognizable and iconic organization throughout the upstream oil and gas businesses. Together we achieved unprecedented energy production in the U.S. and across the globe. From the beginning, we have fueled ourselves by the power of our phenomenal people, and those people are now building the most important, integrated problem-solving platform across the world’s largest, most significant, and impactful industry ever – energy,” Gilmer said.

During the last three years, the company has grown tremendously through product innovation, market expansion, and acquisitions. Enverus will now be comprised of three business units – Enverus Drillinginfo, Enverus Trading & Risk, and Enverus Business Automation – all of which are highly complementary to one another and together create value for customers that could never be achieved otherwise.

Jeff Hughes, CEO and President, added to Gilmer’s remarks noting that, “The vision was always to build a company that created uniquely valuable data through active connections between businesses in the energy industry. We now operate the largest such system of active networks that has ever existed, and it is growing rapidly. The data analytics that result from this historically unique graph of energy industry participants are unprecedented, and it will create value for our customers that could never be provided any other way. This is an example of how our capabilities have expanded so much since our founding and we came to believe that our name no longer reflected our reach, so it was time to modernize the brand.”

The name Enverus is comprised of three elements that when combined, reflect the company’s past, present, future, and overall philosophy. EN: the energy industry; VER: clarity and truth; and US: partnership, collaboration, people, and humanity.

Jeff Hughes concluded by saying, “Energy is the largest industry in the world with unique regulatory, geopolitical, technological, demographic, and environmental complexities. Enverus will continue leading the industry in tackling these complexities with offerings that include irreplaceable efficiency tools and analytics that enable better, faster decisions. More powerfully, each of these capabilities connect our customers in ways which create value like no other business in the world.”