The value buyers now place on various reserves categories has changed dramatically from a few years ago, says Jefferies & Co.’s Bill Marko. At the peak, companies would pay 100% of the PDP at a low discount rate (typically between 8-10%), for behind pipes nearly 100%, for a good portion of the PUDs, and they might even pay for the probables and possibles.
When the market bottomed out a year ago, however, sellers were only getting paid for the PDP component. “That’s where the buyers adjusted,” says Marko. “They were not willing to take much risk beyond PDP.”
That is starting to change. “We’ve seen some decently aggressive oil deals lately. People are starting to pay more for value beyond PDP.”
While A&D activity has trended up, the return has been slower than he anticipated. Most deals in second-half 2009 involved shale or oil, and many were “do-overs” from broken deals in late 2008, such as Denbury Resources’ acquisition of Conroe Field assets, and several divestitures by Forest Oil.
Unease over gas prices will stifle gas-weighted deals over the next year, he anticipates. “They’re still worried about over supply, but you’ll see some deals.”
Noncore exits will come to the forefront, such as recent packages offered by St. Mary Land & Exploration, Encana and Forest. “Others will come to market where companies are cutting costs. And a lot of shale-focused companies are trying to sell their nonshales.”
2010 will involve big companies taking positions akin to ENI’s quarter-billion dollar deal in the Barnett to ExxonMobil’s $41-billion buyout of XTO Energy. “We’ll see everything in between,” he says.
Joint ventures will continue to be popular, and farm downs in the deepwater Gulf of Mexico will proliferate.
“It will be a good year for A&D.”
SM Energy Announces $0.15/Share Quarterly Cash Dividend
2023-03-30 - SM Energy's board of directors announced the quarterly cash dividend of $0.15/share of common stock outstanding will be paid out to stockholders on May 5.
Oil Rises on U.S. Crude Draw, Iraqi Supply Risks
2023-03-30 - Looking ahead, markets will be keeping an eye on U.S. spending and inflation data and the resulting impact on the value of the U.S. dollar.
Haynesville to Lead Gas Production Growth in 2023
2023-03-30 - Enverus expects the Haynesville to lead gas production growth in 2023 and then fall thereafter before growing again between 2025 and 2027, Bernadette Johnson, the firm’s general Manager, said at Hart Energy’s DUG Haynesville conference in Shreveport, Louisiana.
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2023-03-30 - Andy Huggins, senior vice president of the Haynesville division at Southwestern Energy Co. discusses M&A, how the company’s Appalachia and Haynesville assets complement each other and efforts to certify its natural gas as responsibly sourced, particularly for utilities and end-users in Europe.
DUG Haynesville: Bob Barba Sells Refracs to Extend Wells, Protect Parent Wells [WATCH]
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