Think of it as the seventh inning stretch. After an impressive first-quarter run, joint venture volume was a changeup pitch in the second quarter of 2011 if you count individual deals, and less dramatic than a pop infield fly if measured by dollar volume.

The question is whether the trend line of more deals at smaller dollar levels signals buyer fatigue in the big league JV market. In fact, buyer fatigue could be a factor in why JVs are starting to surface in farm club size packages in places like Alaska or the Gulf of Mexico shelf, which are well outside the foul lines of the unconventional oil and gas plays.

Year-to-date totals for joint ventures came in at $3.85 billion through the end of June, according to Hart Energy's A&D Transactions Database. But that included a healthy $3.6 billion in first-quarter 2011 totals as both Chesapeake Corp. and Anadarko Petroleum inked multi-billion deals with Asian national oil companies from China and Korea.

Year-to-date totals represent a minor contribution to an overall dollar figure that is closing in on $28 billion in announced value during the last five years. That figure should top $30 billion within the next year since the market anticipates sizeable JVs in the Utica/Marcellus shales, Oklahoma's Mississippi carbonate lime, and the Niobrara. But it's another question entirely whether that dollar figure will top $35 billion. While the JV era hasn’t finished the batting order, it is getting late in innings with the bottom part of the lineup left to bat.

Let me root, root, root for the home team

No doubt the JV era transformed domestic oil and gas in the last half of the first decade in the 21st century. JVs played a key role in the acreage capture portion of the tight formation oil and gas play in North America. With large drilling carries a characteristic of JV arrangements, operators like Chesapeake and Anadarko have been able to use OPM—other people’s money—to keep drilling dry gas even when the commodity markets were signaling a need to slow gas drilling down.

The JV era evolved through several iterations since the earliest deals in 2006. The heyday so far has been the 2008-10 time period. That heyday began with the movement into dry gas plays such as the Marcellus and the Haynesville in 2008 as the industry experienced a debilitating case of shale fever. The JV became a vehicle that allowed larger entities with deep pockets to gain a slice of the shale pie by partnering with nimble independent oil and gas operators who leased land first and asked geologic questions later. Drilling carries, coupled with the need to capture acreage before the lease expired, eventually resulted in a glut of natural gas as operators kept drilling and drilling and drilling, even as gas prices weakened.

More recently, JVs have focused on liquids or liquids-rich targets in the Eagle Ford and Niobrara.

By play, the Marcellus and Eagle Ford have been the two main focal points of JV movement. Together, both represent 57% of the announced value in JV transactions since the lead-off single in 2006. The Haynesville runs a distant third with $4.8 billion in deals, though the numbers trail rapidly lower for all other plays. At $1.275 billion, the Niobrara is sixth on the list but will attract additional dollar volume in the future.

Joint ventures have experienced a golden age in the 2008-11 time frame though the target of JV partnerships has evolved from dry gas in the Haynesville and Marcellus in 2008 to liquids rich plays such as the Eagle Ford and Niobrara over the last year.

JVs are not a preferred solution in every play. In fact, the area with the smallest amount of JV action remains the Bakken shale.

Buy me some peanuts and Cracker Jack

By buyer, Statoil, with $4.4 billion in announced transactions, still outdistances No. 2 CNOOC at $3.4 billion. Statoil's participation is notable for the ground-breaking nature of its large 2008 deal with Chesapeake in the Marcellus as the JV era began its stretch run. Statoil double-dipped in the Marcellus with Chesapeake subsequently and levered off that experience when the Norwegian major entered a JV with Canada’s Talisman in October 2010 to acquire a 50% stake in 97,000 acres in Eagle Ford shale properties from Enduring Resources. Statoil's Eagle Ford holdings today consist of a 50% share in 134,000 net Eagle Ford acres with Talisman, and more than 660,000 net acres in the Marcellus.

Graph compares JVs by dollar volume quarterly versus asset or corporate purchases among the Major oil companies in U.S. unconventional plays. The Major oil companies are making their move to acquire unconventional acreage and quarterly transaction values from that acquisition spree now meet or exceed JV volume. Missing from the graph are the two big elephants in the room, ExxonMobil’s $41 billion purchase of XTO Energy in the fourth quarter 2009, and BHP-Billiton’s $15.1 billion purchase of Petrohawk Corporation in July 2011, outside the time frame of the graph.

CNOOC came late to the U.S. JV game but clearly has momentum. The Chinese NOC partnered with Chesapeake most recently in a $1.27-billion JV involving one third of CHK's 800,000 net acre Niobrara-prospective holdings in January 2011. CNOOC and Chesapeake got an early start in October 2010 with a $2.16-billion JV involving one third of Chesapeake's 600,000-acre Eagle Ford Shale holdings. CNOOC may yet end up as the major participant in U.S. JVs as the process winds to a close.

Of note, the Top 5 JV participants represent $16.8 billion and account for 60% of announced transaction value for domestic JVs. Four of the Top 5 JV purchasers—and 11 out of the Top 12—are foreign nationals with Plains Exploration & Production, at $3.3 billion, the sole U.S. buyer of note following its June 2008 JV with Chesapeake Energy Corp. for 20% of Chesapeake’s 555,000 net Haynesville shale acreage.

By hemisphere, European majors have invested $13.3 billion in U.S. JVs while Asian firms and NOCs have invested $9.9 billion. Looked at another way, European and Asian firms represent $23.3 billion in investment, or 84% of the dollars that have been expended on U.S. JVs. One can argue that foreign investment has been the major stimulus in U.S. unconventional resources during the JV era. Of course the major oil and gas companies are giving the JV crowd a run in the shales with $39 billion in acquisitions during the last 18 months, including BHP-Billiton’s July 2011 $15.1-billion purchase of Petrohawk Corp., a U.S. independent that had little interest in JV participation.

Consequently, the market may be transitioning from the JV era to the era of the Majors. Together, both trends have provided significant investment in the U.S. For perspective, toss in ExxonMobil’s $41-billion acquisition of XTO Energy in December 2009; add $39 billion in shale purchases by other majors including BHP-Billiton; next, mix in the $23 billion in JV investment from foreign nationals and the dollar totals top $104 billion, most of which has happened in the last three years.

Little wonder the unconventional rig count continues to rise--and the fact is the industry is just getting under way on shale development in so many different plays.

As for sellers, one company, Chesapeake Energy Corp., accounts for 51% of the dollar volume in those JVs that have released fiscal terms. Anadarko Petroleum Corp. is next at $2.95 billion, followed by EXCO at $2.25 billion.

For it's one, two, three strikes you're out

JVs aren't dead; they aren't even finished. But it is safe to say that the JV era has peaked and--while not yet in its dotage--is getting a little long in the tooth. One reason the bloom is off the rose, so to speak, is the volatile mix of different corporate or financial interests for participants. JVs have been strategic marriages rather than marriages of passion. They have been an outstanding vehicle for cash-strapped U.S. independents who have had to pay aggressively to acquire acreage, but still face multi-year, multi-billion dollar drilling programs before they achieve their financial promise.

And, JVs have been an excellent entrée for foreign firms into the new technological frontier of tight formation oil and gas, which is one of more significant industry developments over the last half decade. Presumably, those firms will leverage that knowledge capture globally even while the Majors are moving ahead with long-term development programs domestically in areas like the Marcellus.

But questions about JVs—and JV viability—remain. What, for example, are the long-term corporate interests of a large foreign entity versus those of a smaller U.S. independent who may be a one shale wonder? For example, when it comes to operating the acreage, foreign majors may be slow and cautious as befits larger firms who work by committee, versus the wild-west Get'R-Done entrepreneurial mentality of a U.S. independent.

Furthermore, how inherently stable is a relationship where a foreign firm needs $6 or $7 gas for breakeven versus their U.S. partner who has passed its own operating costs on to the JV partner in the form of drilling carries and who only needs $1.50 gas to break even? In a perpetually oversupplied natural gas market, such issues can add friction to the relationship.

Consequently, it is notable that the largest JV during the second quarter 2011 involved the $250 million, five-year deal between Encana Corp. and Oregon natural gas distributor Northwest Natural Gas Co. The utility will pay for access to Encana’s Jonah/Pinedale assets, providing its customers a guaranteed supply of gas from one of the continent’s most savvy operators. That may be a model others emulate in the future.

In the meantime the main signal that the JV era is entering the final innings of the game is the fact that the Majors are now moving in a big way to obtain large acreage blocks in strategic resource plays. Outside of BP, the Majors have been focused on land and corporate acquisitions rather than partnering up with a junior firm. Obviously the Majors prefer to be the operating partner and have the deep pockets and long planning horizons necessary to develop shale acreage to its full potential, which is the trend that appears to be gaining momentum in transactions even as the JV movement pauses for its seventh inning stretch.

What's out there? Well, there is Chesapeake, who is scheduled to ramp drilling in Appalachia's Utica shale and Oklahoma's Mississippi lime carbonate play in anticipation of a JV arrangement during the second half of 2011.

Certainly Seneca Resources (National Fuel Co.) has seen a varied response to its attempts to joint venture 750,000 acres in the Marcellus shale. So far, there has been no announcement on how that process will end after Seneca examines a complicated and varied set of bids that came in before the end of July.

As for the rest of 2011, we’ll see. Meanwhile, batter up.

Contact the author, Richard Mason, at