Throughout the transaction process, sellers ask A&D advisors what methodology they plan to use to locate the most appropriate buyer for their properties. Finding the right match for E&P assets is at the core of being successful.

As the A&D auction and sealed bid/negotiated sale exchanges shift further from localized, provincial markets to a national distribution of buyers, the challenge of optimizing divestment success increases. The search for the best-fitting buyer is now one of national scale, where buyers often emerge from any location, at any time.

If we can thank technology for making the market larger and harder to navigate, then the most fitting course of action is to turn it back on itself, optimizing the search for the correct asset purchaser.

This is no small task. At the heart of the pursuit is the use of geographic analysis of industry activity coupled with potential buyers’ activity in any given producing province.

That is to say: Identify the players, categorize and map their particular activities, and combine the two sets of data in a manner that produces a high-graded list of potential buyers.

This analysis starts with more than 150,000 individual contacts taken from disparate groups including, but not limited to, companies that are permitting, drilling, buying leases, have purchased or sold properties, and are involved in A&D and industry organizations. From this group, a list of entities is produced comprising the most appropriate, acquisitive potential buyers to whom the property is exposed.

Permian participation

Take, for example, the Permian Basin and its frothy A&D market. The tendency to “buy local, sell local” served this province well in the past, but in our industry’s transformed, expanded market, sellers of Permian assets will fall far short in optimizing their divestment by relying on local basin players only.

The first portion of a geographic analysis consists of locating all of the participants in our historical archive of auction and sealed bid sales and then pinpointing the location of the assets being conveyed. These two sets of data are then correlated to the location of buyers for a set of assets confined to any geographic area, be it an entire basin or a more tightly defined area such as a specific portion of a developing play.

In the Permian example, we find that while residents of the basin make a reasonable showing as purchasers of Permian assets, they, as a group, are far from the most likely to be the winning bidder. In fact, our data shows that only 16% of Permian properties have been sold to people or companies located in the region.

The Dallas/Fort Worth area is a stronger buying group, taking home 19% of the assets, and the Houston area competes strongly by acquiring 17% of Permian properties marketed at EnergyNet. It’s the location of the remaining 48% of Permian buyers that is the most surprising: They are spread evenly across the nation. Denver, Oklahoma City, San Antonio and Amarillo hold the next tier of buyer concentrations, but each represents less than 5% of past Permian buyers.

The remaining third of buyers of Permian assets defies categorization. As the map of buyers illustrates, Washington State, Southern California, Florida and New York City each have offered buyers for Permian Basin assets. The time of localized markets and, by extension, regional marketing, is past.

Shift to national

A recent sale of an operated package in Ector County, Texas, validates the concept that potential purchasers can come from unexpected locations. This sale, consisting of more than 40 producing wells, received bids from a national pool. Five entities in the Dal-las/Fort Worth area placed bids, as did three from the Permian Basin, three from Houston, two from Denver, and the remaining four bidders were spread nationally.

The winner of the auction was a company from California that, prior to this asset purchase, did not have a strong presence in the Permian. Without the technology and tools to decouple the location of a potential buyer and its areas of interest and activity, the task of optimizing A&D transactions is increasingly difficult.

The trend of buyers coming from across the nation plays out strongly in the Permian both in theory and practice. While EnergyNet’s marketplace has thousands of registered buyers residing in the Permian, when we look at the top bidders for the Permian, it becomes clear that the shift to the national/international arena is more robust than ever before.