The Haynesville/Bossier Shale was discovered in 2008 in East Texas and Western Louisiana. As a play, it differs from other reserves in that it is saturated with smaller independent operators compared to plays like the Eagle Ford and the Permian over the last decade. Despite its challenges, the current market indicates brighter days ahead for the Haynesville. We explore the latest trends in the basin in this week’s post.
The Q3 2024 issue of Mercer Capital’s Exploration and Production Newsletter focuses on the Appalachian basin. Appalachian production declined over the last twelve months due to reduced drilling activity, driven by low natural gas prices and high storage inventory. Consequently, Appalachian E&P stocks generally saw year-over-year price drops across the board. Despite recent setbacks, there is optimism for 2025.
M&A activity among upstream participants in the Marcellus and Utica Shales has been sparse in recent years, with Shale Experts reporting only one transaction since November 2022. This week’s Energy Valuation Insights blog takes a break from deal multiples to observe the negotiations of the $7.4 billion merger between Chesapeake Energy Corp. (“Chesapeake”) and Southwestern Energy Co. (“Southwestern”), a significant player in the Marcellus Shale.
In the last year, M&A activity in the upstream area of the oil and gas industry has increasingly become top-heavy, characterized by several headline deals. While the broader North American E&P deal count has been shrinking since 2022, a handful of major acquisitions in the last year have led to a spike in upstream M&A spending. With fewer yet higher-dollar deals and producers eyeing to expand their portfolios of core acreage, the energy industry’s M&A market has greatly shifted in 2024.
The 2Q24 issue of Mercer Capital’s Exploration & Production newsletter focuses on the Permian. Permian production growth over the past year was a positive outlier among the four basins covered in our analysis, with Eagle Ford, Appalachia, and Haynesville all posting production declines (albeit Appalachia’s decline being insignificant at 0.3%). While showing typical reactions to global and national energy economic forces, commodity prices ended the period modestly improved. Rig count declines were greater than production declines, partly due to the continuation of the recent trend in DUC count declines.
In addition to our overview of the Permian, this newsletter also contains:
– Oil and Gas Commodity Price Update
– Macro Update
– Industry M&A Activity
– Public Company Performance
– Production Update
– Rig Counts
Download the newsletter to stay up to date on the industry.
The shale industry is showing signs of maturity. Some acquisition trends appear to be burgeoning, such as acquisition premiums, more debt, and looser hedging requirements. These portend higher values and perhaps more of an emphasis on longer-term drilling inventory as opposed to nearer-term production metrics.
Transaction activity in the Permian Basin declined over the past 12 months, with the transaction count decreasing 53% to nine deals, a decline from the 19 deals that occurred over the prior 12-month period. This level is also well below the 21 deals that occurred in the 12-month period ended mid-June 2022 and the 27 transactions that closed during the same time period in 2021. While the pace of M&A activity in the Permian has waned relative to prior years, deal size is making up for lower deal volume. But despite fewer “big game” targets remaining, the Permian Basin still offers resources to companies seeking to maintain high-quality reserve inventory.
It’s an election year, and the battle is on. SilverBow Resources, a publicly traded oil and gas company operating in South Texas’ Eagle Ford shale, is wrapped up in a big conflict with some of its own shareholders. Kimmeridge Energy Management, both a large shareholder and a rival operator in the Eagle Ford, has proposed a merger (which it, at least temporarily, withdrew last month), and now is proposing several new board members in a proxy battle. The primary question centers on the direction of SilverBow’s value enhancement strategy. However, it appears this strategy hinges, in part, on its debt position, and dividend policy. Management has one idea on how this should go; Kimmeridge clearly has another.
In a significant development for the energy industry, on February 21, 2024, Chord Energy Corporation and Enerplus Corporation announced a definitive agreement to merge. This strategic combination aims to create a powerhouse in the Williston Basin, leveraging their complementary strengths and operational expertise. But acquisitions are not the only transactions happening in the Bakken. The University of North Dakota received substantial federal funding to investigate the potential of utilizing captured carbon dioxide to enhance oil recovery in the Bakken. As these narratives develop, only time will tell how both will shape the future of the area.
The 1Q24 issue of Mercer Capital’s Exploration & Production newsletter focuses on the Eagle Ford. Despite significant rig-count declines, Eagle Ford production declined only modestly over the twelve months ended March 2024, aided by a significant number of DUCs going into production. Reasonably steady commodity prices helped offset the basin’s production decline, allowing the region’s comp group to post favorable price increases over the review period.
In addition to our overview of the Eagle Ford, this newsletter also contains:
– Oil and Gas Commodity Price Update
– Macro Update
– Industry M&A Activity
– Public Company Performance
– Production Update
– Rig Counts
Download the newsletter to stay up to date on the industry.
M&A deal flow was sidelined for much of 2022 and 2023, but pent-up M&A demand is expected to compel buyers and sellers to renew their efforts in 2024 and beyond. As deal activity recovers, sellers need to be prepared to present their value proposition in a compelling manner. This is when having an independent Quality of Earnings Report tailored to the seller’s needs becomes crucial. In this post, we review five reasons sellers benefit from a QofE report when responding to an acquisition offer or preparing to take their business models or assets to market.
The Eagle Ford shale has seen a significant decline in M&A activity over the past year, with only two deals closing compared to 13 in the prior year. However, recent purchases by Silverbow Resources and Crescent Energy signal a potential uptick in activity in the area. Meanwhile, Chesapeake Energy has fully divested from the Eagle Ford, focusing on natural gas-rich formations in the Marcellus and Haynesville shales. Despite the slowdown, Enverus Intelligence Research predicts an increase in M&A activity in the Eagle Ford in 2024.
Our latest analysis of Q4 2023 earnings calls in the energy sector reveals a consistent focus on efficiency and the impact of global demand. Upstream companies are capitalizing on international demand for LNG and LPG, while oilfield service firms are benefiting from efforts to enhance energy security worldwide. The industry’s commitment to operational effectiveness is evident in investments in durable inventory, conversion efficiency, and the integration of advanced technologies, positioning companies for future success in a market increasingly driven by sustainable energy solutions.
U.S. oil seems to be headed toward a period of upward price pressure. U.S. natural gas on the other hand, appears to be back in a somewhat oversupplied position.
Chesapeake Energy Corporation and Southwestern Energy Company announced a merger to create the largest natural gas producer in the United States, with an expected output of 7.9 billion cubic feet per day. This $7.4 billion all-stock deal, expected to close in the second quarter of 2024, will see Southwestern investors receiving 0.0867 shares of Chesapeake for each of their shares. The combined company, with an estimated enterprise value of $23 billion, hopes to gain easier access to capital, achieve investment-grade status, and possibly join the S&P 500 while navigating potential antitrust concerns and a potential decrease in NGL prices.
Year-end 2023 is quickly approaching so that means it’s time to take a look back at the year. Here are the top ten posts for the year measured by readership. Thank you to our readers for your constant support! It’s our honor to cover the oil & gas industry for you.
Key themes we saw in Q3 earnings calls for oilfield service (“OFS”) companies were a rebound in activity, increased M&A in the space, and a focus on capital returns. Operators agree on a positive outlook for 2024, driven by factors like healthy commodity prices and global demand. As the industry evolves and OFS operators continue to make strategic shifts, we’ll keep you updated on future changes.
Explore the behind-the-scenes journey of the $5.4 billion merger between Sitio Royalties Corp., a key Marcellus Shale player, and Brigham Minerals, Inc. From initial boardroom discussions to the complex interplay of exchange ratios and legal negotiations, see how two of the largest public companies in the mineral and royalty sector and their legal and financial advisors navigated challenges to achieve a strategic consolidation. Read how business strategies, market conditions, and negotiations shaped an industry leader in mineral and royalty acquisitions.
Exxon made waves in the energy M&A markets by announcing its acquisition of Denbury, Inc. In total, the headline value was around $4.9 billion. However, while Denbury is an energy company on the whole, it is made up of two main segments that have very different economics, and neither of their business segments appears to be worth the $4.9 billion price tag. So what did Exxon buy exactly, and how might one value it?
Despite a flat transaction activity in the Permian Basin over the past year, the increasing scarcity of Grade-A drilling sites has led to a spike in the value of deals, with two recently closed deals valued at over $2 billion each. Amidst this landscape, companies are paying more per acre than before, with the median price per net acre increasing by 43% year-over-year, potentially suggesting a shift in focus towards undeveloped acreage. Furthermore, recent transactions, such as Civitas Resources’ $4.7 billion acquisitions of oil-producing assets in the Midland and Delaware Basins, highlight the industry’s continued attraction to the Permian Basin’s potential for high-return drilling inventory.
Amidst the current uncertainty in the upstream world, the case of TXO Energy Partners LP’s recent IPO provides valuable insights into investor behavior. TXO’s focus on optimizing existing wells, maintaining a conservative balance sheet, and a commitment to regular cash distributions are attracting investors seeking stability amidst unpredictable market conditions. We explore TXO’s story and what this might mean for the future of the upstream sector.
In the mire of much of the chaotic goings on of the world energy markets and Ukraine over the past year, a lot of things have changed. Uncertainty has ruled the day. Commodity prices have now dropped significantly in the last six months. Yet, between the lines, there is optimism for the upstream industry as profitability and cash flows remain, and the possibility for acquisition premiums for target companies re-emerges in 2023.
Every February, NAPE’s Global Business Conference provides insights from multiple industry perspectives. This year it included discussions of energy policy around the globe, reviews for 2022, and outlooks on the 2023 merger and acquisition market.
M&A transaction activity in the Marcellus & Utica shales increased in 2022 relative to 2021, with large industry players motivated by free cash flow growth and creating shareholder value and less motivated by championing the ESG cause. In this week’s post, we examine the two largest transactions that occurred in but were not limited to the Marcellus and Utica shales in 2022.
