HOUSTON, March 15 – A group of oil and gas “mini-majors” are emerging among U.S. shale producers, built from aggressive dealmaking that industry players expect will accelerate on strong commodity prices and the retreat of Europeans from U.S. onshore production.
Source: Reuters
The players, including Devon Energy Corp DVN.N, EQT Corp EQT.N, Continental Resources CLR.N, Pioneer Natural Resources PXD.N and Diamondback Energy FANG.N, are poised for another round of dealmaking, according to interviews with a dozen sources.
“The conditions are there for public companies, in particular large independents and mid-caps, to use dealmaking to reshape themselves and ensure they have adequate inventory to capitalize on this commodity price supercycle,” said Pete Bowden, global head of energy and power at Jefferies.
Among potential targets are Colgate Energy Partners, controlled by Pearl Energy Investments and NGP, and Ameredev II, backed by EnCap Investments. Both were formed after their private equity owners put separate companies together to make them more attractive to the emerging mini-majors.
HOUSTON, March 15 (Reuters) – A group of oil and gas “mini-majors” are emerging among U.S. shale producers, built from aggressive dealmaking that industry players expect will accelerate on strong commodity prices and the retreat of Europeans from U.S. onshore production.
The players, including Devon Energy Corp DVN.N, EQT Corp EQT.N, Continental Resources CLR.N, Pioneer Natural Resources PXD.N and Diamondback Energy FANG.N, are poised for another round of dealmaking, according to interviews with a dozen sources.
“The conditions are there for public companies, in particular large independents and mid-caps, to use dealmaking to reshape themselves and ensure they have adequate inventory to capitalize on this commodity price supercycle,” said Pete Bowden, global head of energy and power at Jefferies.
Among potential targets are Colgate Energy Partners, controlled by Pearl Energy Investments and NGP, and Ameredev II, backed by EnCap Investments. Both were formed after their private equity owners put separate companies together to make them more attractive to the emerging mini-majors.
“If you look at the big deals done in the last couple of years, every buyer has been proven right, in securing A-1 locations at valuations which now appear cheap, with the benefit of hindsight,” he said.
Volatile prices make it tougher to strike deals as buyers and sellers disagree on valuation. Still, tie-ups continue.
Last week, Whiting Petroleum Corp WLL.N and Oasis Petroleum Inc OAS.O announced a Bakken-focused combination. This year, PDC Energy Inc PDCE.O and Civitas Resources CIVI.Nstruck deals which, if all are consummated, would give four companies most of the production in Colorado’s Denver-Julesburg basin.
The role model for the mini-majors is ConocoPhillips COP.N, the former major that shed refining and much of its international assets to become the top Permian producer by volume. It spent about $23 billion in the last 18 months buying Shell and Concho Resources properties in Texas.
PRIVATE EQUITY’S ROLE
As European majors have exited, private equity firms are offering fuel for further deals. Oil prices at 14-year highs are kicking up asset values and providing opportunities to exit long-held investments.
“With prices going up, and most of private equity focused on harvesting existing investments in this space, they are more likely to be sellers too, and so the independents will have those opportunities to look at as well,” said Lande Spottswood, partner at law firm Vinson & Elkins.
