8,062 Active Recruiters     Over 2 Million Candidates Globally

  1. Keep me logged in
  2. forgot password

Checkout Jobs Basket (0)

You can checkout a maximum of 150 jobs.

Signup Better for Candidates

  • Create a free virtual CV and let recruiters find you
  • Automatically have your profile matched to suitable Oil & Gas positions
  • Link to your profile using it as a free online CV
  • Store all your employment documents to your profile for easy sending
  • Always receive feedback on positions applied for

Signup Better for Recruiters

  • Advertise Oil and Gas jobs for free
  • Suitable candidates automatically matched to your position
  • View candidate profiles for free
  • No more waiting for candidates to respond to job advertisements
  • Only ever pay when you match a candidate to a position
  • No more cold calling and sorting through out dated CVs

'Drunken Sailor' Oil Spending May Stir Investor Merger Push

Published in Oil Industry News on Thursday, 11 January 2018

Graphic for News Item: 'Drunken Sailor' Oil Spending May Stir Investor Merger Push

Ben Dell doesn’t just want to change how oilfield executives are paid. He thinks there could be a lot fewer of them around.

As crude prices rise, companies will be tempted to spend more to boost output, he said, even as investors seek higher returns. The answer: mergers and acquisitions, said Dell, a managing partner at Kimmeridge Energy Management, a private-equity firm with about $1.7 billion in limited-partner commitments since its founding in 2012.

Now, many explorers spend needlessly on administration and other overhead even as they work close by in the same shale basins, he said. Dell is among a growing chorus of shale investors pressing for better returns. His remarks on consolidation follow similar comments by others, including Goldman Sachs Group Inc. in November.

"You’re going to see an increasing amount of investors get involved in the space, looking to force companies into combinations," Dell said in a telephone interview. "The reality is if you weren’t motivated by preserving your job, you would run these companies completely differently."

WTI, has climbed almost 50% since June and now sits above $60. But producers have failed to keep up, growing their share prices by roughly half that amount in the same period. At the same time, oil and gas mergers in the U.S. and Canada fell 12% last year to $129 billion, according to data compiled by Bloomberg.

Old Habits

Dell says investors are concerned explorers will return to old habits moving forward.

“When oil prices go up, these guys spend like drunken sailors,” he said. “When oil prices go down, they turn around and say, ‘Look, it’s not my fault the oil price went down. I can’t be expected to manage this commodity.”’

In the Permian Basin, more than 40 companies with at least 20,000 acres each are ripe for consolidation, while in the smaller Niobrara field of Colorado, Dell sees eight drillers that could combine to slash more than $1 billion in the corporate cost identified on balance sheets as “selling, general and administrative,” or SG&A.

Dell’s Kimmeridge owns stakes in PDC Energy Inc., Carrizo Oil & Gas and Resolute Energy. Dell declined to comment on how his consolidation views related to the companies Kimmeridge owns.

Large explorers outspent their cash flow by 117% over the past seven years, according to Barclays. The top 15 oil companies have paid executives $2.8 billion over the past decade while delivering a smaller return to shareholders versus other industries.

Closing the Gap

Corporate consolidation can help close the gap between oil’s rise and lagging driller shares, according to a Goldman Sachs Group Inc. research note at the end of November.

“We believe U.S. shale producers will see a rising need for scale to further improve recovery rates and lower supply costs,” a group of analysts at the firm led by Brian Singer wrote. “This could bring a new term to the investor lexicon: The SuperE&P.”

Explorers bulked up during the shale boom primarily through individual asset deals, Victor Barcot, managing director of energy investment banking at Houlihan Lokey, said in a phone interview. Now that the land grab is essentially over, the opportunity for producers to buy big asset packages in some of the hottest plays is fading, pushing companies to consider corporate deals.

No Premiums?

Yet consolidation among explorers won’t be easy, David Deckelbaum, an analyst at KeyBanc Capital Markets in New York, said in a phone interview. This era of lower oil prices makes it especially hard to pay a premium in a merger.

“You’ll probably see consolidation that’s more in the order of mergers of equals, or stock-for-stock deals,” Deckelbaum said.

Human dynamics can’t be ignored in all this, said Buddy Clark, an oilfield transactions attorney at Haynes & Boone in Houston. He expects companies will try to just keep their own assets, forgoing deals.

“Each management team thinks they have the secret sauce,” Clark said.

Source: www.worldoil.com

Please leave comments and feedback below


American Oil and Gas, Oil and Gas Fracking, Gulf of Mexico Oil and Gas, Oil and Gas News

Oil and Gas News Archive

Latest Oil & Gas News

Featured Companies

  • View All JobsNOVATEK

    NOVATEK is one of the largest independent natural gas producers in Russia.

    Engaged in the exploration, production, processing and marketing of natural gas and liquid hydrocarbons, NOVATEK have 20 years of operational experience in the Russian oil and natural gas sector.

    Visit us online: www.novatek.ru/en/

  • View All JobsChronos Oil and Gas

    Chronos Oil and Gas is one of the fastest growing and best placed recruitment agencies in the sector.

    With over 300,000 candidates on our database and an international team of specialist recruiters we work with clients to staff major projects around the world.

    Register your CV at www.chronosoilandgas.com

  • View All JobsNatural Resources

    Natural Resources is a UK based recruitment company providing personnel of all disciplines and nationalities worldwide.

    We represent clients and candidates at all levels who operate globally within oil & gas, renewables, nuclear, power, mining, marine, drilling, construction and petrochemicals. Our client base includes energy and construction.

    Visit Natural Resources at natural-resources.com