M&A Activity expected to increase

[dan_s]

Denbury Resources buys Penn Virginia for $1.7 billion. Chespaeake Energy follows suit, gobbling up another Eagle Ford shale player, WildHorse Resource Development for $3 billion. Canada’s Encana Corp. tops them both, acquiring the Newfield Exploration Co. for $5.5 billion in the beginning of November. Those are three big deals that happened over four days recently, all targeting Houston shale exploration and production companies. And the Houston energy investment banking firm Tudor, Pickering, Holt & Co. said that’s just the “tip of the M&A iceberg.”

Expect more to come in 2019. “Buckle up as the upstream merger train has left the station, and next year will likely be a wild ride,” the firm said while unleashing a torrent of clichés.

The last few years saw a land rush in West Texas’ Permian Basin in what’s become the world’s hottest oil play. This spring saw Permian holdings begin to consolidate under bigger players after nearly all of the top acreage was scooped up. Now, it appears the merger spree is spreading to onshore shale nationwide. Penn Virginia is an Eagle Ford company. WildHorse is focused on the emerging northeastern portion of the Eagle Ford west of College Station. Newfield, of The Woodlands, has a mix of assets, but it’s primary focus is in Oklahoma. “Early this year it was predominantly a Permian play,” said Neal Dingmann, an energy analyst with SunTrust Robinson Humphrey, “and now it seems to be expanded to all of North America.” Dingmann said he expects more corporate combinations in other regions such as North Dakota’s Bakken shale, but dealmakers will still focus on the Permian. It’s just that the Permian won’t hog all of the fun.

More: https://www.mysanantonio.com/business/t ... 374204.php

[bobs]

These stock for stock mergers of energy companies at beaten up prices are what seem to be the trend vs out right cash acquisitions by a bigger energy company of the smaller ones also at beaten up prices. Any thoughts on why that isn't happening??

[dan_s]

Scale matters in the very capital intensive development phase of the shale plays. Each deal is being done for different reasons. The EnCana + Newfield merger is the most interesting to me. EnCana is a former Sweet 16 company that may be coming back into the fold.

I love the Concho + RSP Permian deal, which was done because their acreage fit together so well. This deal was 1 + 1 = 2.5.