A&D math is changing because the structure of the upstream industry has changed, which affects A&D activity and capital inflows, said Doug Reynolds, speaking at Oil and Gas Investor’s 16th annual A&D Strategies and Opportunities conference.
“A key benchmark is net economic locations, which is a better indication of undeveloped value. So we’re starting to think about metrics differently,” said Reynolds, managing director and head of U.S. investment banking for Scotiabank.
“A couple of years ago we talked about acres. Then we were talking about effective acres where you stacked things up, but now we’re talking about economic effective acres,” said. “We think the economics of individual locations are really starting to matter. A location that doesn’t earn 20% at strip prices is being dropped out of the M&A analysis.”