Occidental Petroleum Corp.’s $38 billion acquisition of Anadarko Petroleum Corp. revives the simmering conversation advocating for industry consolidation.

The deal’s rationale includes acreage access, cost reduction and an opportunity to achieve manufacturing efficiencies long-promised but infrequently realized. Shale plays evolve in a progression from discovery and delineation to optimization to full-field development. Each phase requires different management and technical skills. The ability to amass acreage or nimbly respond to geological and engineering challenges is different than the skills required to transition organizationally from geologic prospecting to reservoir engineering or full-field harvest, where supply chain mastery dominates.

The industry begins shale play development as Aubrey McClendon’s ‘Chesapeake model’ but exits on the long tail of gradual decline as the ‘EnerVest model.’ Different management teams excel at different stages. Organizational challenges generally prevent a single management team from being the best across all phases of shale evolution, whether the benchmark is capital efficiency or technical proficiency. It took a village of multifaceted and diverse management approaches to accelerate shale development. Indeed, the absence of a diverse universe of players accounts for the slow traction of tight formation progress outside North America.

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