OGI This Week

More than 40 companies with $17 billion in debt filed for bankruptcy in 2015. Many others are expected in the new year while A&D activity may increase for companies with the wherewithal to make deals.In South America, Aubrey McClendon's American Energy Partners has secured a deal with Argentina's state-run firm to invest more than US$500 million in developing the Vaca Muerta Shale over the next three years.As a bright spot for the industry, U.S. offshore development was among the untapped energy sources mentioned for potential in terms of production, jobs and economic growth in an oil and gas association’s report.
For the first time since the lifting of a 40-year export ban, Eagle Ford Shale oil has recently set sail for international waters from the Port of Corpus Christi.On the other side of the world, the conflict between Iran and Saudi Arabia has not yet significantly rattled the oil market. However, analysts say the potential for market and supply disruption exists.On the deal-making front, Wood Mackenzie predicts the oil market will continue to tighten in 2016, eventually boosting prices in the second half and leading to a pickup in M&A activity.
At the tail end of 2015, Swift Energy entered bankruptcy to reorganize after executing an agreement with Texegy LLC to sell a 75% share of its holdings in Louisiana oil fields.As for U.S. natural gas production, analysts with Simmons & Co. International are forecasting it will fall by 600 MMcf/d, or by 1% in 2016. The drop would be the first such decline since 2005.Further into the New Year, KeyBanc's Keith Buchanan predicts the oil and gas market will remain oversupplied, bankruptcies will continue at a steady march and companies will increasingly seek capital through asset sales.
U.S. oil could eventually sell at a premium on the international market following the lifting of the crude export ban on Dec. 18. U.S. shale oil is lighter and sweeter than Brent, making it more desirable to refiners.In the Appalachian Basin, Magnum Hunter becomes the most recent shale producer to seek bankruptcy protection. So far in 2015, the collapse in commodity prices has thrown more than three dozen North American E&Ps into peril.At Cheniere Energy, Charif Souki, the company's co-founder, chairman, president and CEO, has been voted out. His departure comes about four months after activist investor Carl Icahn took a stake in the company that eventually rose to 13.8%.Editor's note: the weekly newsletter will next publish Jan. 5 following observance of the holidays.
Kinder Morgan has decided to cut its dividends by 75% to 50 cents, a move that will generate nearly $4 billion in discretionary cash flow, insulating the company from equity markets while its stock is down.In Pennsylvania, LOLA Energy is using local connections to open doors in its leasing program and pursuing acquisitions in the Marcellus while also keeping open options if the Utica ‘bet’ pays off.Meanwhile, the International Energy Agency said that production in the Americas and elsewhere will abate, creating a supply and demand balance that begins to stabilize prices by the end of 2016.
Dave Hager, Devon Energy’s president and CEO, touted the company's recent $1.9 billion purchase of Oklahoma acreage. However, with a fully stocked larder of oil and gas assets, investors penalized the company.Worldwide, there's no end in sight for the current oil glut following OPEC's much-anticipated Dec. 4 meeting. The cartel's decision to keep production at current levels could mean continued pressure on oil prices—at least for the first-half of the year, analysts say.In West Texas, a major explosion rocked an Anadarko Petroleum gas plant last week. Construction crews were working on expansions to the plant, but what caused the blast is still unknown. No one was seriously injured.
Dire market conditions may have caused some to consider halting investment offshore, especially given a strong shale presence onshore. However, where some companies may see a barrier, Noble Energy sees opportunity.Meanwhile, after selling a portion of its Midland Basin position, Resolute will now work on the potential sale of midstream infrastructure assets to chip away at its more than $700 million of outstanding debt.Also, President Barack Obama has rejected putting a large-scale force in Syria, but calls for troop deployment could lead to a conflict that unsteadies the Middle East's oil production.
For months now, the favored parlor game has been speculating on when the M&A logjam will break. But when Anadarko Petroleum revealed its rebuffed takeover bid of Apache, the market reacted with skepticism.With $5 billion in liquidity, Noble Energy has decided to take action to remain cash flow neutral in 2016 by cutting its workforce by 7%.Institutional investors may think the industry has finally hit bottom and has better days ahead, as shown in a recent survey where 52% of respondents said they have become more bullish in the past month.Note next week there will be an interruption of the weekly newsletter in observance of Thanksgiving. We will resume on Dec. 1.
Since its initial application nearly seven years ago, Transcanada’s Keystone XL pipeline has become a symbol for politicians and environmental groups—for different reasons. However, the $8 billion project might've hit its final snag under this administration.Back in January plans to market 85-year-old Fidelity Exploration & Production had been delayed by its parent company. Fast foward nine months and Fidelity is being treated as a discontinued operation as sales efforts go forward.The former chairman of MarkWest's management company wants to scuttle a multibillion dollar merger between the company's MLP and Marathon Petroleum. John Fox, former CEO, chairman and director of MarkWest Energy GP LLC, questioned why the company is selling itself for "pennies on the dollar."
There is at least one exception to the declining value of deals in the Eagle Ford. Mark Paull, the vice president of Goldman Sachs’ global natural resources group, said deal size and metrics in the popular basin have come down across the board since the price collapse in oil and NGLs, but he points out a notable exception: the $118-million EnerVest Ltd./Alta Mesa deal in September.Third-quarter 2015 transactions in the oil and gas sector were certainly powered by midstream megadeals. The upstream sector also saw a rebound with deals in the Permian, Eagle Ford and Utica/Marcellus, according to PwC. What lies ahead for the fourth quarter? Depending on who you ask, the opinions vary.Like its peers, BP is cutting costs because of the challenging market environment. In 2015, the company said it divested $7.8 billion and expects to sell another $3-5 billion worth of assets in 2016. On the other hand, year-end production from new wells is expected to reach about 160,000 barrels of oil equivalent per day.
An ode to Oklahoma, where the oil and gas come gushing down the plains. Oklahoma is one of the nation’s top five producing states, and its mix of oil and natural gas in indeed impressive. More Americans than ever before think climate change is a legitimate issue. Seventy-six percent say climate change is occurring. That number is up from 68% one year ago, according to a poll.Here’s a voice of optimism during today’s volatile environment. “I’m here to tell you the oil and gas industry is still relevant and here for the long term,” said Jay R. Pryor, vice president of business development for Chevron Corp. Happy reading, and here’s to better days ahead.Mike MadereManager, Digital News Groupmmadere@hartenergy.com
There’s a ton of important news within the pages of Oil and Gas Investor This Week:Stefan Selig, U.S. undersecretary of commerce for international trade, thinks the role of natural gas in the nation’s economy will continue to grow. Furthermore, Selig said, the place of natural gas as an export will be of particular importance going forward.It looks like a years-long ordeal is winding down for BP. A $20 billion settlement with the U.S. government and five coastal states has been finalized. Attorney General Loretta Lynch said BP is “receiving the punishment it deserves” while also providing compensation for harm to the environment and the economy of the Gulf Coast region.While some companies are eager to put properties on the market, other firms are intent on gobbling them up. Earthstone Energy Inc. is one of them. The company is trained on the Eagle Ford, Bakken and Permian as it watches for the right deal to come along.