News Release

Crashing Oil Prices and Equity Market Volatility Grind Energy Deals to a Halt

byEnverus

Austin, Texas (April 2, 2020) – Enverus, the leading oil & gas SaaS and data analytics company, has released its Q1 summary of M&A activity, which revealed a substantial collapse as oil prices plunged to 18-year lows. Only $770 million in U.S. upstream deals were completed during the first quarter of 2020—less than one-tenth of the ~$8 billion average for Q1 from 2010-2019. Virtually all deal activity occurred before the global COVID-19 pandemic and production hike from Saudi Arabia slammed markets in early March.

“Even before oil prices collapsed on COVID-related demand issues and the surge in global production led by Saudi Arabia, M&A markets were highly challenged,” commented Enverus Senior M&A Analyst Andrew Dittmar. “Responding to Wall Street pressures, E&Ps had slashed spending and refocused from growth to cash flow dampening the appetite for acquisitions.”

The largest deal of Q1 was the successful stalking horse bid by Alpine Energy Capital for the assets of Permian producer Approach Resources, which opted for a sale of all assets in Chapter 11. In pursuing a post-bankruptcy sale, Approach joined STACK-focused Alta Mesa and Marcellus developer EdgeMark Energy. EdgeMark’s assets were acquired in Q1 by KeyBank via a $90 million credit bid. With creditors perhaps leery of taking equity in a reorganization, Chapter 11 sales may drive future deal flow. On the other hand, creditors of Sanchez Energy are reportedly taking equity in a reorganized company as a possible conclusion to its Chapter 11 process and Whiting Petroleum filed a voluntary Chapter 11 on April 1st with a restructuring agreement in principle with certain debtholders.

Top Five Deals of Q1 2020

More positively, mineral and royalty assets had substantial momentum coming into 2020. In early January, Kimbell Royalty Partners, one of six publicly traded royalty companies, bought a diversified package from private equity sponsored Springbok Energy I & II for $175 million.

“Mineral and royalty interests are playing an increasing role in deal markets,” said Enverus Market Research Director John Spears. “We expect additional capital will be interested in deploying here, even in a down market. The challenge will be navigating a wide bid/ask spread between buyers and sellers with rig numbers and development plans for acreage in flux.”

Wide bid/ask spreads are also an issue on the operator or working interest side of the industry, as buyers and sellers attempt to get a handle on collapsing crude prices. In addition, trends around a slowed pace of drilling and reduced capex have accelerated substantially, reducing the need to add further inventory. Finally, access to capital is tightly constrained for most E&Ps as debt and equity markets are largely out of reach and many banks are looking to trim rather than expand energy industry exposure for their lending books amid an uncertain outlook.

For select potential buyers that have or can access capital, there should be ample opportunities once some stability is established in commodity and equity markets. Buyer groups with potential to capitalize on opportunities are likely to include majors, private and institutional capital, and foreign buyers.

“As painful as the downturn is, this may finally push the industry into healthy consolidation that leaves us with larger, more efficient, and better capitalized operators when the recovery starts,” added Dittmar. “These buyers will likely have opportunities to acquire high-quality assets that might have been viewed as too expensive before the downturn.”

It remains to be seen when buyers may feel comfortable enough with the market to commit to deals. Based on past market crashes, it will take the establishment of a bottom in commodity prices and the creation of upward momentum before companies feel comfortable committing to deals. That timing remains uncertain and will be driven by a post-COVID return to normalcy and OPEC’s decision around production levels.

Click Here for additional detail on Q1 2020 Oil & Gas M&A activity.

About Enverus
Enverus is the leading data, software, and insights company focused on the energy industry. Through its SaaS platform, Enverus provides innovative technologies and predictive/prescriptive analytics, empowering customers to navigate the future. Enverus’ solutions deliver value across upstream, midstream and downstream sectors, enabling the industry to be more collaborative, efficient and competitive. With more than 1,000 employees across the globe, the Company’s solutions are sold to more than 6,000 customers across 50 countries. Enverus is a portfolio company of Genstar Capital and brings together the technology of Drillinginfo, PLS, 1Derrick, MineralSoft, Midland Map Co., MarketView, DataGenic Group, PRT, Oildex, Cortex, Red Dog Systems and RigData as one company. Creating the future of energy together. Learn more at www.enverus.com.

Picture of Enverus

Enverus

Energy’s most trusted SaaS platform — creating intelligent connections that uncover insights and opportunities to deliver extraordinary outcomes.

Related News

Enverus Press Release - Forecasting the unpredictable President Trump
News Release
ByEnverus

Enverus Intelligence® Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, has released its latest Fundamental Edge report, which focuses on global drivers for oil and gas prices through 2030,...

Enverus Press Release - Utica oil: America’s modest middleweight contender
News Release
ByEnverus

Enverus Intelligence® Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, has released a new analysis of recent well performance and economics in the Utica shale and how it compares...

Enverus Intelligence® Research Press Release - Lower oil prices could lead to Permian spending cuts
News Release
ByEnverus

Enverus Intelligence® Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, has released a report examining the Permian Basin’s production and drilling activity if operators cut spending next year to...

Enverus Press Release - Enverus Earns Top Workplaces Honors for Fourth Consecutive Year
News Release
ByEnverus

Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, has once again been recognized as a Top Workplace by both the Austin American-Statesman and Houston Chronicle, marking the fourth consecutive year for this prestigious honor.

Enverus Intelligence® Research Press Release - Canada’s Montney and Duverney: North America’s most abundant unconventional resource plays
News Release
ByEnverus

Enverus Intelligence® Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, is releasing its annual Montney and Duvernay Play Fundamentals that examines recent drilling trends, well inventory counts and associated...

Enverus Intelligence® Research Press Release - Haynesville operators calculate remaining growth
News Release
ByEnverus

Enverus Intelligence® Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, is releasing its annual Haynesville Play Fundamentals that examines the distribution of remaining inventory across the play using economic...

Enverus Intelligence® Research Press Release - Opening New Mexico’s Delaware Basin and the potash problem palliated
News Release
ByEnverus

Enverus Intelligence® Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, has released a report that explores the resource potential of the Known Potash Leasing Area in the Delaware Basin...

Enverus - RatedPower Press Release - RatedPower expands efficiency and precision with solar project design software release
News Release
ByEnverus

RatedPower, a part of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, is releasing new software updates aimed to further assist solar developers, engineering, procurement and construction firms giving them greater flexibility in designing...

Enverus Press Release - No pain, no gain: Short-term headwinds for natural gas could bring beneficial long-term tailwinds
News Release
ByEnverus

Enverus Intelligence® Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, has released its updated natural gas outlook through 2035.

Find Out How Enverus Can Help Your Business

Subscribe to the Energy Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Get Started

Register Today

Sign Up

Power Your Insights

Connect with an Expert

Access Product Tour

Speak to an Expert