- Yes: 48%
- No: 50%
- Not sure: 1%
Friday, September 21, 2012
Time For New Poll: Will XOM Buy More Williston Basin Bakken Acreage?
Results of the most recent poll which asked the question: is this good for North Dakota -- that the rig count was decreasing? The results, evenly split:
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I would agree . Makes sense that xom would establish a position via acquisition given the current state of play and xom's balance sheet as opposed to drawing a circle on a map and hiring/contracting landmen to go out and secure acreage. There is also the issue of xom's lack of detailed technical focus as compared to almost all established bakken operators (nog being the exception as the nog business plan is to not focus on geology and technology, just figure out by hook or by crook what
ReplyDeleteeog is/was focusing on). Xom unlike nog has in house rcorstion geo/eng capability they just have not been applying it to bakken and now i have to ask if any large blocks of unleased bakken acres are even availably . Bottom line xom's plan would seem to be to use it's resources to buy in by acquisition, xom itill late to the game to be able to lease their way in.
I doubt if there are any "large" blocks of unleased "good" Bakken available.
DeleteIf as seems to be the case that xom has a strategy of acquisition, then the major risk would seem to be that xom could pay too much for the acquired acreage.
ReplyDeleteThe lease positions of the current bakken operators is very low compared to 15k$
Xom just paid. Then, there are the obvious risks faced by all operators to o e degree or another.
Price of crude
Recoverable oil actually in place
Drilling, completion and transport costs
Ndic hearings on xom's new properties may give hints on xom plans and intentions.
In xom's case, the project must be large. Xom is not organized to address "small" field operations
It is interesting to read that last line ""XOM is not organized to address 'small' field operations."
DeleteI agree completely.
I just sent a note to a reader who knows the Bakken very, very well, asking the same question / pointing out the same observation.
I will post a stand-alone note along this line sometime over the weekend, but you are absolutely correct. This might be a big deal for North Dakota, but for XOM it's not even big enough to warrant an asterisk on a briefing slide.
I have no doubt Exxon will buy more within the next couple years. The only uncertainty I have about your poll question is "in the next 12 months."
ReplyDeleteI'm curious when one of the other remaining majors (Shell, Chevron, BP, Total, or someone like PetroChina) will finally buy into the Bakken. I expect one or more to enter at some point.
With XOM buying into the Bakken, others, I'm sure, will be looking.
DeleteLooking at the size capital XOM brings to the table, I think this is beginning of several buyouts by this operator. Companies such as Kodiak, Oasis become very attractive to a company like XOM.
ReplyDeleteOasis and Kodiak were built to be sold. Denbury wanted alternative fields, and seem to be betting on a nat gas upsurge (especially with Cheniere now having the finances for liquified nat gas).
ReplyDeleteExxon Mobil just doesn't seem to do acquistions correct. They bought XTO (not exactly small) at nearly the nat gas peak. XTO had bakken acreage, which is practically the only redeeming feature of that acquisition. Now XOM basically admits that XTO was a mistake by swapping with Denbury. XOM could have made sweet offers to Kodiak, Oasis, or Brigham 24 months ago, but did not.
Meanwhile, Chevron and Shell have been building nat gas positions in the Marcellus and Utica from the ground up in a cheaper manner than XOM with XTO. Why Shell and Chevron haven't moved into the Bakken is interesting.
Statoil, EOG, and Pioneer (in the Permian) are the co's that seemed to have best read the future. Even BHP Billiton, an Australian mining company, moved at the right time in Eagle Ford with their purchase of Petrohawk.
Most perplexing to me: the amount of production XOM gets from the Bakken (XTO plus newly acquired DNR acreage) still will represent an insignificant amount, percentage-wise, compared to the 4.5 million boepd XOM produces globally.
DeleteXOM acquiring more acreage in the Bakken was a big deal for North Dakota oil and gas industry, but it represents such a small amount of production for XOM, it barely merits an asterisk on a slide in one of their presentations. I understand the interest an XOM might have in the Bakken; I don't understand the small entry for such a huge company.
Bruce, "I don't understand the small entry for such a huge company" may be due to Denbury approaching them with this option and Exxon accepted it. I suspect that is more likely than Exxon initiating this acquisition.
ReplyDeleteDenbury never was an exploration company, and certainly not experienced with tight shale. I don't think they were ever comfortable starting an Exploration Division and drilling undeveloped acres. The folks in Plano probably began shopping this around and Exxon was either, the first to say yes, or came back with the best offer. Exxon got good acreage while Denbury got paid to resume their traditional business model. Looks like a win-win to me.
P.S. As to an acquisition "moving the needle" for Exxon, put it into perspective. Even if XOM had bought the entire North Dakota Bakken (675M BOE/day), it would only be about a 15% increase to Exxon's daily production. I guess when you're their size you need to buy entire countries to get noticed. :)
That's the best explanation I've heard so far: DNR was simply shopping their acreage around and XOM was the "lucky dog" as they say in NASCAR racing.
DeleteI agree: win-win. My very first post on the deal suggested that I thought it was a "steal" for both companies. It was only later that I started to think about how little this acreage/production actually meant to XOM. Therefore, the idea of DNR bringing the idea to XOM makes a lot of sense.
By the way, different subject, but related: I'm not so sure it will be easy for KOG or OAS to be bought by someone. It will take very deep pockets for someone to buy KOG or OAS (Shell, CVX, XOM) and I'm not convinced any of these majors are all that interested. That's why your thought that DNR approached XOM with the deal makes a lot of sense. Statoil seems to be an outlier: actively looking to get into US shale.
Bruce, I agree neither KOG, OAS, or anyone will be 'bought on the cheap'. Considering the potential for multiple pay zones beyond today's production, all of the "Bakken" oil companies will carry a decent premium. Yet the pool of prospective buyer may be larger than you think.
ReplyDeleteThese deals don't have to be cash off the balance sheet. It could be cash, share exchanges, debt, or any combination thereof. Beyond Shell, XOM, CVX, even the 'smaller' major oil companies are potential buyers. OXY, EOG, Marathon, Hess, Apache, or Anadarko are each more than large enough to digest a Kodiak or Oasis. Existing debt load may remove some of these. Perhaps OXY's lackluster drilling success may exclude them as well. Yet in terms of the size of the deal, there are still plenty of potential buyers out there.
You're probably right; I'm pretty naive about this things, definitely a novice when it comes to mergers and acquisitions.
DeleteI might expand on this in a stand-alone post some day, but my hunch is that the Bakken is too small to excite the majors (Shell, BP, XOM, CVX, COP): if the entire Bakken was available or a major portion, that would be a different story, but it's fairly well Balkanized (KOG, OAS, WPX, BR, WLL, CLR, Slawson, et al). Buying any one of these for the Bakken won't move the needle a whole lot. Again, CLR at 100,000 boepd pales compared to XOM 4.5 million boepd. (~ 2% if I did the math right). And CLR is nearly the largest, if not the largest, producer in the Bakken. Any others, and the percentage is a whole lot less.
I think it's much more likely that we will see KOG or OAS or WLL CLR acquire more chunks of Bakken over the next few years rather than a major buying a Bakken-centric company. For almost $1.4 billion, QEP got all of 27,000 Bakken acres. A lot of cash for not so many acres.
But we'll see. As I've always said, the Bakken never fails to surprise me.