Investor pressure has E&P companies prepping for deals but waiting for an improved market. Despite the rise in WTI prices, many companies' market values have lagged behind the recovery, particularly in the Permian. The market continues to punish companies that make large deals, according to Hart Energy Senior Editor Darren Barbee. Sources told Barbee they are helping companies to make new deals, but for now, they are biding their time.
There were 13 deals in the Permian during the first quarter totaling $11.3 billion dollars, highlighted by Concho’s acquisition of RSP in an all-stock deal valued at $9.5 billion. The second quarter saw deal value in the Permian at $6.14 billion with the BP acquisition of BHP’s assets accounting for $5.2 billion.
The Bakken had a solid second-quarter with $6.7 billion on seven transactions as some companies look to leave the Permian for easier pickings. Cimarex sold noncore assets for $10,000 dollars per acre, which is an unusually low price for the Permian.
Infrastructure deals have been red hot with what PWC called a record high second quarter for midstream transactions at $33.1 billion. The Permian bottleneck is helping drive midstream deals, including Brazos Midstream $1.75 billion Delaware Basin sale.
E&Ps want in on the midstream action. Apache and Kayne Anderson partnered to form Altus Midstream. Diamondback's Rattler Midstream filed its IPO. Black Diamond was formed from a partnership between EnCap Flatrock Midstream and Noble Energy's Noble Midstream Partners.
Finally, several midstream deals, including the Brazos sale, involved private equity rollovers in which a larger private equity firm buys out a smaller company's midstream assets. Private equity has cash reserves that also makes them formidable in a bidding war.
The Anadarko Basin’s Simpson shale formation is being called “one of the biggest yet-to-be-developed shale plays in the United States.”
Recovering more for less is the ultimate goal for operators and service companies.
Compelling returns at $50 WTI portend bright supply picture.