Stout is an investment banking firm that works on a lot of M&A activity. They recently gave a presentation in Houston at an Energy Conference. Points below are from their slides.
Upstream M&A Outlook:
M&A activity levels have remained reasonably well paced:
• Rush to buy in 2016/2017, now producers are only selling off non-core, non-strategic assets to free up capital to support acquired acreage;
• Focus on holding and developing acreage;
• Low break-even prices in key Permian areas driving producers to drill and monetize acquired assets; and
• Average transaction sizes have generally declined.
Other considerations:
• Permian assets are very expensive;
• Other basins, such as the Rockies and SCOOP/STACK seen as attractive alternatives to the Permian; and
• Continued consolidation for natural gas focused operators.
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I believe that once we get past all of the 4th quarter results, some of the large-caps will take a hard look a acquiring smaller companies that have leasehold which fits well with theirs. Larger companies have more access to capital, lower cost of capital, can immediately eliminate most of the acquired company's G&A and they can often reduce LOE per boe of production by having existing oilfield services spread across more wells. It is also a way to improve the quality of the large-caps staff by "cherry picking" the best people to keep from the acquired company. - Dan
M &A activity in 2018
M &A activity in 2018
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group