?
Source: John S. Herold, Inc. |
Recent deals establishing price benchmarks for proved reserves in certain emerging shale plays—such as the Marcellus in Appalachia—show these plays are evolving from acreage gathering to full development, reports John S. Herold Inc. M&A analyst Brian Ferguson.
“We’re starting to see some proved-up reserves being transacted,” he says. “Up until this point it has been acreage gathering and initial drilling appraisal.”
In addition to the Marcellus, these plays include the Fayetteville and Woodford in the U.S., and the Montney and Muskwa in Canada.
Meanwhile, the Haynesville is an example of a play still undergoing only acreage gathering.
XTO Energy Inc.’s recent agreement to acquire Marcellus assets from Linn Energy LLC “is noteworthy as it is the first announced purchase, providing a benchmark for producing properties in the Marcellus shale,” Ferguson says.
“We’re seeing a couple of these large reserves transactions in each one of these new shales. We may be moving into another phase of the life cycle in the development of these shales.”
Shale plays have accounted for an increasing percentage of total U.S. deal value during the past five years. In 2007, buyers paid some $4.2 billion in shale gas deals or 9% of total U.S. upstream transactions, compared with about $200 million and 1% in 2003, Ferguson reports.
This year, through April, the total deal value is about $3.5 billion and accounts for 23% of total U.S. M&A. On a global scale, U.S. shale acquisitions in 2008 hold 10% of worldwide deal value.
The Barnett has been the focus of shale acquisition activity for the better part of the decade. Its transaction history is an indicator of the likely path of M&A activity in the newer shale plays, Ferguson forecasts. Citing the Barnett as a model, acreage acquisition transactions will transition to resource and reserve assets before evolving to significant regional consolidation among players, likely winnowing to fewer than 12 in a play.
Like the Barnett, the Michigan Antrim shale is a mature, producing formation. It too has witnessed consolidation among regional participants, Ferguson says, particularly among master limited partnerships (MLPs).
“We expect further consolidation activity in emerging shale-gas plays, such as the Fayetteville, Woodford, Marcellus and Haynesville shales in the U.S., and the Montney and Horn River/ Muskwa shale in Canada,” he says.
“We’re at a point now where we may be looking at the next step into full development of the new shales where some of these companies are willing to pay up to get into the proved reserve segment.”
Recommended Reading
Kissler: OPEC+ Likely to Buoy Crude Prices—At Least Somewhat
2024-03-18 - By keeping its voluntary production cuts, OPEC+ is sending a clear signal that oil prices need to be sustainable for both producers and consumers.
Exxon Mobil, Chevron See Profits Fall in 1Q Earnings
2024-04-26 - Chevron and Exxon Mobil are feeling the pinch of weak energy prices, particularly natural gas, and fuels margins that have cooled in the last year.
Oil and Gas Chain Reaction: E&P M&A Begets OFS Consolidation
2024-04-26 - Record-breaking E&P consolidation is rippling into oilfield services, with much more M&A on the way.
Buffett: ‘No Interest’ in Occidental Takeover, Praises 'Hallelujah!' Shale
2024-02-27 - Berkshire Hathaway’s Warren Buffett added that the U.S. electric power situation is “ominous.”
Aramco Reports Second Highest Net Income for 2023
2024-03-15 - The year-on-year decline was due to lower crude oil prices and volumes sold and lower refining and chemicals margins.