The Mercer Capital Oil and Gas industry team covers merger and acquisition activity as well as provides an economic profile for four primary oil and gas plays: Permian Basin, Eagle Ford Shale, Haynesville Shale, and Marcellus & Utica Shale.  This week’s blog offers economic and M&A snapshots into four more plays: Uinta Basin, Bakken Shale, DJ Basin, and SCOOP/STACK.

Uinta Basin

Where Is the Uinta Basin and What Does It Produce?

Located in Utah, the Uinta Basin’s waxy crude oil (consistency is similar to shoe polish) stands out due to its low sulfur, metals, and nitrogen content, making it a more environmentally friendly option compared to other crude oils.  Uinta crude features a medium-to-light API gravity (a measure of how heavy or light a petroleum liquid is compared to water), ranging from 32 degrees to 36 degrees for the “black wax” variant and 38 degrees to 44 degrees for the “yellow wax” type.  For comparison purposes, water has an API gravity of 10 degrees.  An API gravity above 10 degrees is considered “light,” whereas an API gravity less than 10 degrees is considered “heavy.”  Light oil produces a higher yield of gasoline or diesel when it is refined.

Challenges in the Uinta Basin

Transportation remains a challenge, as pipelines are not an option due to the crude’s tendency to solidify at ambient temperatures.  The crude must be kept heated (black wax at 105°F and yellow wax at 120°F) before being transported in insulated tanker trucks to one of five Salt Lake City refineries or to various rail terminals. Approximately 90 Mb/d are processed locally in the Salt Lake City area, while 70 Mb/d are shipped to Gulf Coast refineries via truck and rail.  Rail is particularly advantageous due to its infrastructure, enabling easier transport in solid form and reheating at the destination.

Six oil transloading terminals have been constructed in Utah to facilitate rail transport: Musket Corporation (Helper, 2010), Newfield Exploration (Ogden, 2013), Savage Services (Salt Lake City and Wellington, 2013), Crescent Point Energy (Salt Lake City, 2013), and Price River Terminal (Wellington, 2013). These facilities have a combined capacity exceeding 50 Mb/d.

M&A in the Uinta Basin

In June 2024, SM Energy signaled confidence in the Uinta Basin’s economic potential by acquiring $2 billion in assets from XCL Resources.  Two months later, in August 2024, KODA Resources, a subsidiary of Quantum Capital, acquired the Uinta assets of Caerus Oil and Gas, LLC, as part of a larger $1.8 billion transaction. 

Bakken Shale

Where Is the Bakken Shale and What Does It Produce?

The Bakken Shale is one of the largest onshore oil fields in the United States, covering almost 9,000 square miles across North Dakota and Montana. Crude oil produced from the Bakken is among the highest quality in the world.  Though no longer in its boom period, the Bakken remains a critical part of U.S. crude production. Output has stabilized near 1.2 Mb/d, bolstered by adding 1,459 new wells since December 2022. While production has become “gassier,” creating natural gas and NGL takeaway constraints, innovations such as longer laterals, efforts to reduce flaring, and CO2-enhanced oil recovery (EOR) could revitalize the region.

Bakken crude reaches markets through pipelines such as Enbridge’s North Dakota Pipeline (NDPL) and Bakken North Pipeline, Dakota Access Pipeline (DAPL), Pony Express and Saddlehorn, and rail transport.

M&A in the Bakken Shale

In April 2024, Mercer Capital discussed the merger of Chord Energy and Enerplus, which created an $11.0 billion powerhouse entity focused on the Williston Basin within the Bakken Shale.  A few months prior in January 2024, Silver Hill Energy Partners, LLC acquired the oil and gas assets of Liberty Resources II, LLC in the Williston Basin.  Financial details on the transaction were not disclosed.

DJ Basin

Where Is the DJ Basin and What Does It Produce?

The Denver-Julesburg (DJ) Basin spans approximately 20,000 square miles across Colorado, Wyoming, Nebraska, and Kansas. Local production, currently at ~520 Mb/d, peaked at 565 Mb/d in 2019 but has since declined. Pipelines like Saddlehorn and Pony Express transport DJ crude, with capacity utilization nearing 86%. Despite these constraints, infrastructure remains robust, with an overall utilization rate of 79%.

The DJ Basin has been a major contributor to the U.S. energy industry for decades.  Data from the U.S. Energy Information Administration (“EIA”) reveals the DJ Basin was among the top five oil producers in 2023. Specifically, the Niobrara region within the basin recorded a daily average output of 670,000 barrels of oil (mbbl/d) and 1,534,000 barrels of oil equivalent (mboe/d). The Niobrara shale, predominantly an oil-rich formation, is situated in northeastern Colorado with extensions into Wyoming, Nebraska, and Kansas.

M&A in the DJ Basin

As of May 6, 2024, IOG Resources II, LLC announced its acquisition of Civitas’ assets for $215 million located in Weld County, which consists of approximately 1,480 developed and undeveloped wellbores.  In January 2024, Prairie Operating Co. purchased the oil-weighted assets of Nickel Road Operating, LLC for $84.5 million.  The assets included 5,592 net leasehold acres, 89 approved well permits, and 26 operated horizontal wells.

SCOOP/STACK

Where Is the SCOOP/STACK and What Does It Produce?

The SCOOP (South Central Oklahoma Oil Province) and STACK (Sooner Trend Anadarko Canadian Kingfisher) are oil reserves that run across most of western Oklahoma and into the Texas panhandle in the Anadarko basin. These two acronyms represent Oklahoma’s most productive oil and natural gas plays today and are the catalyst for a majority of the state’s oil and natural gas-related revenues.  The unique formations that make up the SCOOP and the STACK have multiple zones that allow for production from multiple layers of rock formations thousands of feet below the surface.

Challenges in the SCOOP/STACK

With a size of only 3,300 square miles, the SCOOP/STACK lacks room for a large number of operators compared to other plays.  As such, there is an increased likelihood that new wells will reduce production capacity for existing wells (while also causing the new wells to have lower production rates than initially forecasted).  Additionally, the SCOOP/STACK has considerable depth, which can lead to higher extraction risks and costs that damage profitability.

Earlier in 2024, Mercer Capital highlighted some of the operational risks of the SCOOP/STACK.  For instance, with reserves in the SCOOP/STACK under relatively low pressure, operators focusing on oil production often find that their reservoirs contain higher amounts of natural gas instead.  Because Oklahoma typically has higher gas transportation costs, operators elect to shut down some wells early on in their lives in unfavorable natural gas price environments. Additionally, in 2015, legislators in Oklahoma introduced new wastewater disposal rules after they stated that water injected into the rock pores was causing earthquakes.  As a result of these new regulations, the areas where operators can drill are even more limited, and operators are legally required to incur additional costs to monitor their water injection rates.

M&A in the SCOOP/STACK

Deal activity in the SCOOP/STACK has been sparse in 2024.  However, on November 6, 2024, Orion Diversified Holding Co., Inc. announced its acquisition of a royalty interest in the SCOOP Stack of Garvin County, Oklahoma. The property consists of a 0.59% royalty interest in 170 acres with active drilling leases already permitted in the area. Financial details on the transaction were not disclosed.

Conclusion

The professionals of Mercer Capital assist clients with various valuation needs in the upstream oil and gas industry in both conventional and unconventional plays in North America and around the world.  In addition to our corporate valuation services, Mercer Capital provides investment banking and transaction advisory services to a broad range of public and private companies and financial institutions.  Contact a Mercer Capital professional to discuss your needs in confidence.