During the coronavirus crisis of 2020, a slew of mergers and acquisitions in the oil & gas space have taken place. But there are still great assets up for grabs – maybe as much as $111 bn USD worth.
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A Year of Mergers & Acquisitions
Some mega deals took place in the US oil & gas space in 2020 amid the strangest year on record. The coronavirus crisis caused demand to crater as oil had found some footing in the $50-60/bbl range and for a moment, dropped oil prices to -$40/bbl as contracts closed.
That situation created opportunities for cash rich companies to take advantage of exposed positions. ConocoPhillips was able to acquire Concho, a major US firm.
Big Oil Divestitures
Major E&Ps need to focus their strategy and consolidate their base assets. It makes more sense to pool efforts reducing overall costs than to have a little piece in every basin. An Energy think tank had speculated that over $100bn USD of assets could change hands as companies realign themselves geographically.
“According to a study from Rystad Energy last month, ExxonMobil, Chevron, ConocoPhillips, BP, Shell, Total, Eni, and Equinor may have to sell oil and gas resources of up to 68 billion barrels of oil equivalent and an estimated total value of US$111 billion, to adjust to the energy transition”
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Some assets won’t simply move from BP to Shell, or change pad entrance logos from Chevron to Total. New buyers will need to enter the market. Assets from larger companies with deeper pockets have been well researched, built-to-last and properly maintained. For buyers from the outside, this is an incredible opportunity.
Lots of Opportunities
Some companies may be able to find complimentary assets to enhance or expand on their existing market position strengths.
“Even in the U.S. shale patch, which saw several deals announced in just a few weeks, buyers have been looking for resources that either complement their strategies and portfolios or help them to expand to new areas with low capital requirements in the near term.
“Even after 2020’s merger activity, there is still room left for the industry to consolidate,” Enverus M&A analyst Andrew Dittmar said, commenting on ConocoPhillips’ acquisition of Concho Resources.”
Tsvetana Paraskova (Oilprice.com)
It’s not just the larger E&Ps unloading periphery assets. Look at some of the smaller market cap public companies that are struggling. They may have acquired the wrong kind of debt or at the wrong time. Restructuring with a merger or acquisition could allow assets that currently have a higher operating cost
Conclusion
Foreign entities looking to enter the US market may have found their opening. Shareholders from large E&Ps expect a more streamlined approach to the maturing shale basins in the US and efficiencies that deliver value to the bottom line. Good production wells will need to change hands in order to achieve this. This is the moment some investors have been waiting years to see.
Have you found investment opportunities? Are you looking to enter the US market from abroad?