That happened this morning, while researching a completely unrelated subject, when I returned to this Reuters article published October 11, 2010. This article had three major themes:
- The price differential between oil and natural gas is forcing oil and gas companies to shift attention to oil
- That focus is driving merger and acquisition plays in the tight unconventional shale fields
- The expense for developing tight unconventional plays will force mergers among the independents, in addition to acquisitions by the majors, of course
- XOM/XTO
- Hess/TRZ and AEZ
- OXY USA/Anschutz (did Anschutz got completely out of oil, or did he redeploy to D-J)
- Denbury/Encore
- Fidelity/Oasis (not quite the same situation)
Re-reading that article, this jumped out at me (it is nothing new, it just hit me a bit harder than usual):
Looking ahead, however, smaller operators may need to seek external funding as service costs go up and maintaining multiple acreage becomes increasingly capital intensive.
"The higher costs will squeeze some of the smaller, less well capitalized players ... they may find that teaming up with larger players or selling out is a more viable option," said Robert W Baird's Murphy.
Private players such as Tracker Resource Development Inc, or small-cap listed operators Kodiak Oil & Gas Corp -- which had end-2009 proved reserves of 4.46 million barrels of oil equivalent -- and Oasis Petroleum would be the sort of firms that could be in this position, analysts said.One analyst felt that we would see some additional merger/acquisition action before the end of 2010 (which did not happen) but:
Geoffrey King, energy analyst at Van Eck Associates, reckoned valuations of Bakken operators may not come down anytime soon, delaying M&A deals and joint ventures until well into next year (2011).Commodity prices have not collapsed, but the scuttlebutt in the Williston Basin is that lease prices will increase 10-fold on those leases that expire at the end of this years. We might get a hint of what is to happen during the quarterly North Dakota state land lease sales.
"It looks a stretch, but we'll maybe see some activity in 2011... I don't see a huge need for financing opportunities until then, unless commodity prices collapse," he said.
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