The Next Step in Oil & Gas Deal Analysis

Posted by Mark Young

May 21, 2015 9:59:55 AM

Evaluate Energy Deal Analytics Launches Today

Evaluate Energy is delighted to announce the launch of its latest oil and gas industry tool, Deal Analytics.

With acquisition and divestiture activity looking set to significantly increase in the second half of 2015, Evaluate Energy Deal Analytics is perfectly positioned to deliver the breadth and depth of coverage needed to understand deal valuations in the new oil price environment.

Deal Analytics provides access to the existing Evaluate Energy M&A database but with a completely new interface and a plethora of analysis and filter tools, greatly enhancing the usability of the existing global M&A database product.

Evaluate Energy’s Deal Analytics comprehensively covers every upstream oil and gas deal the world over and has gradually expanded over time to include midstream, downstream, LNG and oil service deals.

Expanded toolsets now include; preset dashboards covering region, country and companies, building custom peer-groups ‘on the fly’, macro-to-micro industry views and auto-generated charts to filter, update and analyse data instantly.

Global deal analysis dashboard with multiple chart filters

Global_Deals_Analysis_Small

Oil and gas professionals worldwide use Evaluate Energy’s deal data to understand and compare deal KPIs across the industry with an extensive set of transaction metrics, which include normalised per barrel metrics for both reserves and production for ease of comparison. 

Preset USA analysis dashboards show by state and by play deal activity

US_Deals_by_Play_Small

Evaluate Energy Deal Analytics is unique in its speed, function and ability to deliver almost immediate analysis of global, region and peer group based deal data. Including the wider Evaluate Energy datasets, Deal Analytics forms part of one of the most comprehensive company research tools available on the market today.

To book your Evaluate Energy Deal Analytics Test Drive, simply visit our request page here and we will get back to you within 24 hours

For further information on bespoke company research, please contact Gareth Hector at garethh@evaluatenergy.com or +44 (0)20 7247 610

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Analysing Assets for Sale in Western Canada

Posted by Mark Young

May 19, 2015 7:25:00 AM

The rapid decrease in oil prices has been the catalyst for major strategic asset reviews across Canada, with many oil and gas companies now assessing opportunities for acquisition and divestment.

CanOils Assets is a powerful tool to accelerate and improve the ability to evaluate asset opportunities in Canada for buyers, sellers and their advisors.

The following case study demonstrates how CanOils Assets can quickly and comprehensively support asset analysis.

Case Study: ConocoPhillips

In March 2015, ConocoPhillips (COP) engaged Scotia Waterous Inc. as its exclusive financial advisor in its quest to find a buyer for some Western Canadian assets that were producing a combined 35,000 boe/d as of Q3 2014. As of early May 2015, the assets were packaged as follows, with more information scheduled to follow later in the quarter:

COP_Ghost_Pine_Table1

Using CanOils, we can evaluate all of these asset areas. This case analysis will focus solely on the Ghost Pine assets, which are located in South Eastern Alberta (see note 1).

Step 1 – A Rapid Overview of the Assets

The CanOils Asset WebMap can quickly provide an overview of ConocoPhillips’ wells in the Ghost Pine area. Figure 1 shows all of the ConocoPhillips wells in the area. Figure 2 shows the active wells only.

The final results show that the Ghost Pine area is predominantly gas producing and that ConocoPhillips has 1,108 wells there. 631 of these wells are currently active with 2,831 boe/d of reported working interest production net to ConocoPhillips (see note 2) in December 2014. This production level is somewhat lower than the production indicated by Scotia Waterous, which suggests that the “Ghost Pine” asset package must include other wells in an area beyond the stated location.

Figure 1: All ConocoPhillips Wells in the Ghost Pine Area (includes abandoned, cancelled and suspended wells; see notes 1 & 3)

1._COP_Wells_Ghost_Pine_Area

Source: CanOils Assets Webmap - click here for map legend

Figure 2: All Currently Active ConocoPhillips Wells in the Ghost Pine Area

3._COP_Active_Wells_Ghost_Pine_Area

Source: CanOils Assets Webmap - click here for map legend

Step 2 – Identify the Other Participating Companies in the Area

Of its 631 currently active wells, ConocoPhillips holds a 100% interest in 26% of them. For the remaining 74%, ConocoPhillips is in joint ventures, holding between 13% and 80% interests in the wells. 207 of the wells are part of the Ghost Pine Unit, in which ConocoPhillips holds a 79.75% interest. The following companies as some of ConocoPhillips’ joint venture partners in the area:

Significant Partners of ConocoPhillips in the Ghost Pine Area

COP_Ghost_Pine_Table2

Source: CanOils Assets - Find Out More

Figure 3 lays out all wells in the surrounding area. It is clear that the top 5 players in the area as of December 2014 are:

COP_Ghost_Pine_Table3

Source: CanOils Assets - Find Out More

It is also clear that there is no land availability, with all blocks in the 12 township vicinity of the Ghost Pine field claimed.

Figure 3: All Wells in Immediate Vicinity of ConocoPhillips’ Ghost Pine Wells (includes abandoned, cancelled and suspended wells)

2._All_Wells_-_Area_COP

Source: CanOils Assets WebMap - click here for map legend - see note 4

Step 3 – Data Extraction for Detailed Calculations and Assessment

Detailed well information can then be exported from CanOils Asset into Excel. Some early findings are that Ghost Pine is a mature gas producing area with little drilling activity in recent times.

The most recent ConocoPhillips well was spud in 2009, with the bulk of their currently owned active wells being drilled between 2005 and 2008.

COP_Ghost_Pine_Graph1

Source: CanOils Assets - Find Out More - see note 5

ConocoPhillips is not alone; Figure 5 shows drilling activity for all wells in the area and indicates that there has been a significant decline in drilling activity since 2008.

COP_Ghost_Pine_Graph2

Source: CanOils Assets - Find Out More - see note 6

CanOils Assets can then assess the production of each well in the area. Predictably, with the lack of new wells being drilled, production in the Ghost Pine area has tailed off over time, as shown in figure 6.

COP_Ghost_Pine_Graph3

Source: CanOils Assets - Find Out More

Using CanOils Assets, we have quickly established some key information to better understand the ConocoPhillips’ Ghost Pine assets and the operating environment. Buyers and sellers are now well positioned to act decisively.

This short case study demonstrates just a small part of what CanOils can do for your organization.

Please contact us to find out how CanOils Assets can be tailored to provide valuable and timely insight for all your business development decisions.

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Notes

1) The “area” or “vicinity” referred to throughout the article includes the following 12 townships in South Eastern Alberta: 029-21-W4, 029-22-W4, 030-20-W4, 030-21-W4, 030-22-W4, 030-23-W4, 031-20-W4, 031-21-W4, 031-22-W4, 032-20-W4, 032-21-W4, 032-22-W4. The area was selected because wells producing from the Ghost Pine field were located in these townships and ConocoPhillips’ Ghost Pine gas plant facilities were also located in the area, according to the facility list document from the Alberta Energy Regulator.

2) December 2014 production may not include a small amount of production coming from wells currently in a confidentiality period. CanOils assets includes production on both a gross well basis and a net working interest by participating company basis.

3) It is important to note that all wells referred to as ConocoPhillips wells throughout were not necessarily all drilled by ConocoPhillips and that they are merely now owned, at least in part, by ConocoPhillips.

4) This map does not include the wells in the townships that appear to be empty on the map. ConocoPhillips has only a handful of wells (if any) in the 4 empty township blocks included in the map, so the surrounding wells were excluded from the overall analysis. This map includes all wells in the 12 townships from Note 1, including ConocoPhillips’ wells.

5) There are wells listed as being currently owned by ConocoPhillips in the CanOils Assets product that were spud before 1990, this graph only includes a subset of all the wells and shows the spike in drilling between 2005 and 2008 – before this, all the way back to the 1940s, activity was minimal but consistent. Predictably, many wells drilled before 1990 are now not active; the earliest spud well that is still active and ConocoPhillips now participates in was spud in 1956.

6) Figure 5 includes ConocoPhillips’ drilling activity.

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Hedging Helps Canadian Oil & Gas Companies in Low Price Climate

Posted by Mark Young

Apr 16, 2015 9:56:00 AM

Canadian oil and gas companies that hedged their oil production before the global oil price crash will be very relieved they did so. This CanOils study of 45 TSX-listed companies’ Q4 2014 results (see note 1) shows that many Canadian companies made large realized hedging gains as the oil price fell to around $50 by year-end 2014. This study agrees with a recent EIA article, written using Evaluate Energy data, showing the impact of hedging on U.S. companies during the same period.

Whilst hedging may have seemed over-cautious at the start of the year, with oil prices not having wavered from the $90-$100 mark for quite some time, hedging eventually proved to be a prudent strategy given the collapse of commodity prices by almost 50% towards the end of the year.

Hedging contracts (also known as derivative contracts) are a common risk management strategy for oil and gas producers. A producing company will agree with a buyer to sell future production at a certain price, thus potentially limiting revenues if prices climb, but simultaneously shielding the producer from excessive losses should commodity prices suddenly fall.

The chart below shows that the group of 45 TSX-listed companies, as a whole, experienced both sides of the hedging dynamic in 2014.

TSX_Hedging_Apr_2015_1

Source: CanOils (see note 2)

Whilst high prices were not realized by the 45 companies to their full potential in Q1 and Q2, hedging has clearly helped significantly lessen effects of the commodity price downturn in Canada towards the end of 2014. The graph is almost identical to that reported by the EIA for U.S. companies using Evaluate Energy data. The lines for pre- and post-hedging revenues are almost parallel in Q1 and Q2, begin to converge in Q3 and then switch over dramatically in Q4 as benchmark oil prices began to tumble.  

Of the companies involved in the report (see note 1), the following companies reported the biggest realized hedging gains per boe on their production in Q4 2014. 

TSX_Hedging_Apr_2015_2

Source: CanOils (Includes only companies that reported both a pre- and post-hedging price per boe produced, or whose data allowed both a pre- and post-hedging price per boe price to be calculated)

The biggest gains on hedging in Q4 were clearly made by oil producers rather than gas producers; with the exception of Enerplus, all of these companies’ production portfolios are made up of over 75% oil. Exall (97% oil) and Arsenal (78% oil) made extremely significant gains due to their hedging contracts, rescuing around $22 and $15 per boe respectively.

There is little to suggest the oil price will rebound any time soon, meaning that hedging positions will also play an important role in determining how successful a quarter Q1 2015 was for the 45 companies. The chart below shows the best hedged companies out of the 45 included in this study. The companies were identified as having the highest percentage of Q4 2014 oil and NGL production covered by hedging contracts that are valid in Q1 2015.

TSX_Hedging_Apr_2015_3

Source: CanOils

The CanOils database provides clients with efficient data solutions to oil and gas company analysis, with 10+ years financial and operating data for over 300 Canadian oil and gas companies - including all oil and gas hedging positions on a quarterly basis - as well as M&A deals, Financings, Company Forecasts, Guidance and an industry leading oil sands product.

Notes:

1) The 45 selected companies from the CanOils database fit the following criteria:

a) TSX-Listed

b) Has Canadian oil and gas production

c) Had oil hedges in place at the end of Q3 2014 that would be valid in Q4

d) Reported realized hedging gains on their income statements from Q1-Q4 2014

e) Non-oil sands producer (i.e. less than 10% of production portfolio made up of oil sands)

For a full list of companies included in the report, click here

2) All data in this chart is taken or calculated using the respective companies’ income statements. Post-hedging revenues refers to all E&P revenues plus realized commodity hedging gains or losses.

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Q1 2015 Oil & Gas M&A Tumbles to $7.1 billion in E&P Sector

Posted by Eoin Coyne

Apr 8, 2015 11:54:00 AM

Buyers and Sellers Reach Impasse on the Value of Assets

The value of global upstream oil and gas M&A deals tumbled to $7.1 billion during Q1 2015, a drop of 79% compared to the value in Q1 2014 and a drop of 85% compared to the average value per quarter since the start of 2009. The oil price as per the WTI benchmark started the year at $52 and has moved little since. With Saudi supply policy showing no signs of shifting, large U.S. stock inventories persisting and further supply side pressure from a potential resolution to sanctions on Iranian exports, the chances of a sharp increase in oil price in the near future are slim.

MA_Q1_2015

Source: Evaluate Energy

In the medium-to-long term commodity prices will inevitably return to a semblance of levels seen in the past 5 years as cuts in exploration and development drilling translates into a restoration in the oil price, closer to the required break-even level to sanction new development projects. For any well-capitalized company, this quarter could have been seen as a rare opportunity to acquire oil assets at a steep discount to historical levels. However, with sellers seemingly of an opinion that the oil price is lower than fair value, an impasse has been reached, resulting in the lowest value quarter for oil and gas deals in the 7 years that Evaluate Energy has been tracking all global oil and gas transactions.

Private Companies Active Despite Price Downturn

In times such as these, when the outlook for earnings is poor, it is advantageous to be free from the burden of satisfying a large group of shareholders demanding quick fixes to what will very likely be a cyclical downturn requiring patience. For this reason, private companies have become relatively more prominent during this quarter in the M&A market. Over the past 5 years, private companies have accounted for 10% of the total publicly disclosed oil and gas deal value. In Q1 2015, however, private companies accounted for $4.1 billion of corporate and asset acquisitions, representing a significant 58% of the total global deal value.

In addition to the corporate and asset acquisitions, private equity companies also made inroads into the oil and gas sector via less traditional methods. The largest of these involved Quantum Energy Partners, who agreed a $1 billion deal with Linn Energy for a “Strategic Acquisition Alliance,” which will see Quantum initially committing up to $1 billion of capital to leverage Linn Energy’s experience in acquisitions whilst allowing Linn to maintain its momentum in what would have otherwise likely have been a time of cutbacks for the debt-laden company. EIG Global Energy Partners also invested $1 billion into the U.S. oil patch via the acquisition of $350 million worth of preferred units of Breitburn Energy Partners and the issuance of $650 million of senior secured notes.

Shale Suffers Worst Quarter for 5 Years

The shale industry in North America was strongly cited as one of the chief instigators of the falling oil price and now that the price has settled around $50 it has been one of the first sources of supply to be hit. The comparatively short life cycle of shale wells makes this industry sensitive to short term economics and dramatic changes are already being seen. Whereas 12 months ago oil and gas companies were clamouring to secure rigs to drill new wells in oil plays, many of those rigs are now sitting redundant. The oil rig count in the Bakken has dropped 51% from 185 in Q4 2014 to 91 in the first week of April 2015, likewise rigs in the Eagle Ford play have dropped 31% from 199 to 137 in the same time frame. The effect of the price downturn on M&A in the shale industry has been a quarter with the lowest amount of shale deals since Q1 2009 of $0.4 million, compared to an average quarterly value of $8.9 million over the past 5 years.

Nigeria Sees Surge in Deals

In contrast to the rest of the world, Nigeria experienced a surge in deals during the quarter with a total value encompassing 40% of the global value. With the Nigerian federal government pushing for an increase in ownership of the country’s resources for indigenous companies, three deals were announced by Nigeria-based companies for OML 29, OML 53 and OML 55 for a total of around $2.9 billion. Aiteo Ltd. acquired a 45% interest in OML 29 from Royal Dutch Shell, Total and ENI for $2.55 billion, while SEPLAT acquired a 40% interest in OML 53 from Chevron for $256 million and a 22.5% interest in OML 55 for $132 million from Belema Oil Producing Ltd. The long history of troubles for Western companies in Nigeria may have resulted in many of these assets being labeled as problem assets, but the fact that Shell, Total and ENI have received a consideration that was apparently unaffected by the fall in oil price will have gone some way to mitigate these past struggles. Lastly, Mart Resources Inc., a Canadian-listed company with assets in Nigeria was acquired by Midwestern Oil and Gas Company Ltd. for $365 million.

Whitecap Makes Largest Deal by a Public Company

The largest deal by a public company during the quarter came from Whitecap Resources Inc., who acquired Beaumont Energy Inc. for US$462 million. Whitecap had room to manoeuvre following US$500 million of equity issuances during early-mid 2014, a time when the share prices of oil and gas companies were still strong, leaving its debt-to-capital-employed at a healthy level of 23%. With this acquisition, Whitecap will be building on its existing operations in the Viking area of Saskatchewan at a price of sub-$15 per proved and probable barrel of oil equivalent. The deal structure was 70% weighted towards stock, meaning that Whitecap will still be in a position to consolidate its operations following closure should any further opportunities arise.

Outlook

Even though the oil price is resting at attractive levels right now for buyers, it’s clear that this quarter has come too early for many to make opportunistic acquisitions. Companies will doubtless feel the squeeze as time goes by and Q2 2015 will inevitably be a time when we see an increase in distressed sales as debt-laden companies have their hands forced by the need to furnish debt.

Assuming that a debt-to-capital-employed level of 35% is still a healthy level to operate within, the table below shows the top ten global oil and gas companies that are in a position to make opportunistic acquisitions (data taken from Evaluate Energy’s financial and operating database as per year end 2014 financial accounts – click here to find out more).

MA_Q1_2015_2

Source: Evaluate Energy. NOTE: Since the time of writing this article the 2nd ranked company, Royal Dutch Shell, made an offer to acquire BG for $80 billion.

Top 10 Deals During Q1 2015

MA_Q1_2015_4

Source: Evaluate Energy

Notes

1) All $ values refer to US dollars

2) All data here is taken from the Evaluate Energy M&A database, which provides Evaluate Energy subscribers with coverage of all E&P asset, corporate and farm-in deals back to 2008, as well as refinery, LNG, midstream and oil service sector deals. 

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EIA: Hedging Helps US Producers Mitigate Effects of Falling Oil Prices

Posted by Mark Young

Apr 7, 2015 12:28:00 PM

In a new study of 32 US oil companies that uses data from Evaluate Energy, the US Energy Information Administration (EIA) has concluded that hedging contracts in place during Q4 2014 have helped significantly in mitigating the effects of the global fall in commodity prices.

Hedging isnt the only area where the price downturn had a major impact for U.S. companies, as Evaluate Energy's study into asset impairments in Q4 2014 proves.

EIA_April_2015

For the full EIA study, please click here

This study from the EIA was completed using data from the Evaluate Energy database. Evaluate Energy provides clients with efficient data solutions for oil and gas company analysis. This includes over 25 years of financial and operating data for the world’s biggest and most significant oil and gas companies, M&A deals, a global E&P assets and LNG database and an emerging product that focuses on the North American shale industry. 

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Low Oil & Gas Prices Result in Major Asset Impairments Across the U.S.

Posted by Mark Young

Mar 24, 2015 8:37:00 AM

Large impairments rocked many U.S. companies’ income statements at year-end 2014. The major cause of most of these impairments was the fall in global commodity prices in the final quarter of the year. This is the conclusion of a study looking into asset impairments using the annual data of 72 U.S. oil and gas companies (see notes 1 and 2) available in the Evaluate Energy database.

All data included in this article is available for download at this link

Impairment expenses occur in the oil and gas industry when the current carrying value of a company’s oil and gas properties, for any given technical or economic reason, can no longer be recovered under present conditions.  Our data shows 49 of the 72 companies reported such impairment expenses in 2014, the total of which is around $45 billion. It is apparent that the global fall in commodity prices, while by no means being the only reason for 2014’s impairments, is the major cause for the widespread impairment expenses as a very large proportion of these $45 billion of impairment expenses occurred during Q4 and this is when the fall in prices began to take hold.

Impairments_US_Annual_2014_1

Source: Evaluate Energy: Download all data included in this article by clicking here.

Some companies have obviously been affected more than others by the price downturn. The chart below shows the top 10 companies whose Q4 impairment expenses make up the biggest proportion of their pre-impairment total assets at year end.

Impairments_US_Annual_2014_2

Source: Evaluate Energy (see note 3 for definition): Download all data included in this article by clicking here.

This chart shows that the impact of the fall in prices has not been limited to companies of a certain size, to predominantly oil or gas producers, or to companies focused in certain basins. The market capitalization values of the 10 companies in the chart shown above as of March 17, 2015, ranges from Swift Energy at just over $100 million up to Occidental Petroleum at over $56 billion. The companies also vary widely in their production mix: for Cabot, gas production is 95% of its total production, whereas Penn Virginia’s total production comprises 75% oil. In addition, these companies have operations focused in areas across the U.S., with nearly every major onshore U.S. producing basin represented:

Impairments_US_Annual_2014_3

For the full data set behind this article, please download our supplemental data booklet. In this booklet, the impairment expenses in Q4 and 2014 and the impact of these impairments on total assets for the year is provided for each of the 72 companies. The booklet also shows the impact the fall in prices has had on the market capitalization values of all 72 companies since Q3 2014.

Download Supplemental Data Booklet

Notes

1) The 72 companies included were selected because:

a) Their main production area is the United States;

b) They are based in the United States;

c) As of September 30, 2014, their market capitalization values did not exceed $80 billion; and

d) Their financial year end is December 31st.

2) The full list of companies included is available at this link

3) The percentage fall in total assets for Q4 2014 is calculated by comparing Q4 2014 impairments with the total assets figure for year end 2014 (pre-impairment charge). This gives an estimate of how big an impact the Q4 2014 impairments had on a company’s total assets at the end of the quarter, i.e. if it wasn’t for the Q4 impairments, Goodrich’s total assets figure would have been around 25% higher.

4) All impairment expenses in this report are taken from the companies’ income statements throughout 2014

Evaluate Energy provides clients with efficient data solutions for oil and gas company analysis. This includes over 25 years of financial and operating data for the world’s biggest and most significant oil and gas companies, M&A deals, a global E&P assets and LNG database and an emerging product that focuses on the North American shale industry. Find out more by downloading our brochure.

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Oil & Gas M&A in Upstream Sector Climbs to $37 Billion in Q4 2014

Posted by Mark Young

Jan 13, 2015 10:33:51 AM

The total value of upstream oil and gas m&a deals, according to data from the Evaluate Energy M&A database, reached $37 billion in Q4 2014, a slight increase from the $35 billion total of Q3. However, the falling oil price would have resulted in a sharp decline in total deal value this quarter, had it not been for Repsol agreeing to acquire Talisman Energy for $13 billion at the beginning of December. This one deal represented a significant 35% of Q4’s total deal value and was the biggest E&P deal of the year. 

Oil_Gas_Deal_Value_2013_2014

Source: Evaluate Energy M&A Database

Demand for Oil Assets Predictably Cools

The oil and gas industry was shaken by the continuing fall in global oil prices throughout the quarter. In September 2014, the West Texas Intermediate (WTI) spot oil price was still above US$90 but by early January this had fallen to US$50; company values as well as the value of oil assets began to crash. 

See the impact of the falling oil price on Canadian oil and gas companies here.

The main impact on global E&P M&A of the falling oil price was that the demand for oil assets dropped significantly. For the first quarter in Evaluate Energy’s coverage of the upstream oil and gas M&A market, which began in 2008, there was not a single acquisition of an oil-weighted asset or company with a reported value of greater than $1 billion. Of course, with oil dropping below $50, a lot of discussion now surrounds deals for oil-weighted assets agreed before September that have not completed yet that could potentially be cancelled any time soon. This is all a major turnaround from a few months ago, when the focus was more on where the next “big” oil acquisitions would take place. Whiting Petroleum perhaps surprised some by completing its multi-billion dollar oil-focused acquisition of Bakken operator Kodiak Oil & Gas just before year end. However, as this deal was an all-stock transaction, the falling stock prices of both parties and the unchanged exchange ratio throughout the merger meant that Whiting and its shareholders were not really penalised for the timing of their acquisition, which was agreed when WTI was still above $90. Deals for oil assets that are heavily cash-weighted would be most likely to be cancelled or at least renegotiated if the oil price remains so low.

Gas Assets Take Centre Stage

This lack of oil-weighted deals of course means that gas-weighted deals were the headline-makers in Q4 2014. The biggest of these deals this quarter, in which Repsol agreed to acquire Talisman Energy, was in fact the biggest E&P deal of the year.

Repsol Agrees to Acquire Talisman Energy

In mid-December, Repsol agreed to acquire Canada-based Talisman Energy for a total value of $13 billion, which included $4.7 billion of debt. When the deal was agreed, the price of $8 per Talisman share represented around a 56% premium, a significant price to pay considering the oil prices had well and truly began to tumble at the time, even though Talisman did produce more gas than oil in Q3 2014.

Ever since Repsol was forced into returning its stake in YPF to the Argentine government, the Spanish company has had a rather large gap to fill in its portfolio. Repsol claims that acquiring Talisman is a good fit; it not only bolsters the South American portion of Repsol’s E&P business, but also has attractive asset holdings in North American shale and South-East Asia. Repsol will also be excited by the significant production level and high gas weighting that Talisman brings to the table, both of which will reduce Repsol’s dependency on the higher risk oil production areas of its portfolio, such as Libya, in this low price climate. Whilst many analysts have pointed out Talisman’s failing UK North Sea assets as a huge burden for Repsol to be taking on, the aforementioned positive attributes of Talisman Energy clearly outweigh this and any other negatives in Repsol’s opinion.

KUFPEC Joins Chevron in Duvernay Shale Joint Venture

In the quarter’s other +$1 billion deal in Canada, KUFPEC agreed to join Chevron in the prospective Duvernay shale by acquiring 30% of its assets for $1.5 billion in early October, which includes a cost carry going forward. The exploration wells already drilled on Chevron’s acreage, on which it will remain the operator with a 70% interest, have produced gas in the main, but also a significant level of condensate. Chevron has therefore managed to monetise a liquids-rich asset in a difficult period, while KUFPEC now owns a highly prospective asset that could pay major dividends in the future should prices rebound.

Southwestern Energy Acquires Marcellus Shale Assets

Southwestern Energy is one of the bigger US shale gas producers around, with operations focused in the Fayetteville shale of Arkansas as well as in the Appalachian basin in the north east. It is the company’s portfolio in the latter that was bolstered by acquisitions this quarter, as three deals were agreed for Marcellus shale assets for a combined $5.7 billion.

The first and largest of these deals was announced in October and closed just before year end, as Southwestern agreed to acquire Chesapeake Energy’s Southern Marcellus Assets and a portion of its Eastern Utica assets for just under $5 billion. In December, the company announced two further Marcellus acquisitions from WPX Energy and Statoil, for another $300 million and $394 million respectively. The deals represented an increase in Marcellus acreage holdings for Southwestern of 443,000 net acres, as well as 2.5 tcfe of proved reserves and around 70,000 boe/d of additional production (54% gas). The Marcellus shale has long been sought after, even when gas prices were lower than they are now, due to its close proximity to one of the North America’s main demand centres in the north east as well as the sheer amount of gas on offer for the right producer; Southwestern Energy seems intent on being a major player in the Marcellus for many years to come.

Linn Energy Sells Texas and Oklahoma Assets

In other US unconventional news, affiliates of Enervest Ltd agreed to acquire Linn Energy’s position in the certain tight gas plays, which included the Granite Wash and Cleveland areas, for $1.95 billion. The assets, which also included certain midstream interests, are located in the Texas panhandle and western Oklahoma in the Anadarko basin. The acquirers were intent on bolstering their own portfolios, which are already significantly focused on the areas in question. Linn’s motivation for selling the assets was to fund a $2.3 billion acquisition from Devon Energy that closed in August 2014. In this deal, Linn acquired gas-weighted assets in the Rockies, onshore Gulf Coast and Mid-Continent regions, proving that gas deals in North America for large prices are nothing particularly new this quarter, rather they just stand out more due to the lack of large price oil deals.

Petronas and Statoil agree Largest Deal Outside of North America

Away from North America, the largest deal was also gas-weighted. Malaysia’s Petronas acquired Statoil’s 15.5% stake in the Shah Deniz project of Azerbaijan for $2.25 billion; the assets produced 228 mmcfe/d net to Statoil’s interest in Q3 2014 (80% gas). This sale by Statoil, as well as the sale in the Marcellus this quarter, formed part of the Norwegian company’s plans to refocus its efforts on prioritising high potential future developments. Petronas was no doubt enticed by the high production, whilst the purchase price of around $60,000 per flowing barrel is very reasonable compared to other deals for such high volumes of liquids-rich gas production worldwide. Petronas has been very busy spreading itself around the world’s oil and gas map; in 2014 alone, the company signed co-operation agreements with the state-controlled entities in Mexico and Argentina, completed the acquisition of Talisman’s Montney assets in March to support its move into Canadian LNG and announced a small farm-in deal with Lansdowne Oil & Gas in the Republic of Ireland in November. 

Top 10 Deals of Q4 2014

Top_Deals_Q4_2014_Oil_Gas

Notes

1) All $ values refer to US dollars

2) All data here is taken from the Evaluate Energy M&A database, which provides Evaluate Energy subscribers with coverage of all E&P asset, corporate and farm-in deals back to 2008, as well as refinery, LNG, midstream and oil service sector deals. 

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How Sustainable is Canadian Oil & Gas at $50 Oil?

Posted by Mark Young

Jan 8, 2015 5:49:00 AM

The Canadian oil & gas industry, as in every other country in the world, has been shaken by the continuing sharp decline in global oil prices. Market capitalization values for nearly all oil and gas companies have fallen dramatically as benchmark prices have tumbled; the widely accepted benchmark spot oil price in North America, West Texas Intermediate (WTI) fell from over $90 in September 2014 to around US$50 in January 2015.

CanOils has released a new study looking at 50 of Canada’s biggest oil and gas companies that quantifies just how healthy the industry is in this climate of falling prices. The study takes into account break even costs for all 50 companies as well as current debt levels and hedging contracts.

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The full study can be downloaded for free here.

Key Conclusions of this CanOils Study:

  • Less than 20% of leading Canadian oil and gas companies will be able to sustain their operations long-term in a prolonged period of low oil prices.
  • In the immediate future however, expect minimal change to existing operations; many companies should continue to generate positive cash flow even at US$50 oil, but this is only acceptable in the very short-term.
  • A significant number of companies with high-debt ratios are particularly vulnerable right now.
  • Natural gas-weighted producers’ profits should be protected from the falling oil price, assuming gas prices hold up.
  • Expect to see more M&A activity as companies with the most liquidity upgrade their portfolios.

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The CanOils database provides clients with efficient data solutions to oil and gas company analysis, with 10+ years financial and operating data for over 300 Canadian oil and gas companies, M&A deals, Financings, Company Forecasts and Guidance, as well as an industry leading oil sands product.

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US Refining Sector Sees a Boost in Quarterly Results

Posted by Ilda Sejdia

Nov 24, 2014 5:58:00 AM

Companies with an interest in the US downstream sector have seen a general, significant improvement in performance in Q3 2014 according to a new analysis from Evaluate Energy. The main players, which include super majors BP, Chevron (CVX), ExxonMobil (XOM), Royal Dutch Shell (RDS) and Total (TOT), as well as a handful of domestic players (see note 1), showed a combined increase in adjusted global downstream earnings (see note 2) this quarter.

The boosted earnings recorded by the US refiners in Q3 2014 is mainly attributable to the well-publicised fall in realised oil prices, which has resulted in lower operating costs and higher margin for companies in the downstream sector in general.

Super Majors

US_Refiners_Results_2014Q3

Source: Evaluate Energy (See note 2 for Adjusted Earnings Definition)

European oil majors, BP, Shell and Total, saw their downstream adjusted earnings more than double to US$1.783 billion, US$1.515 billion and US$1.162 billion respectively from Q2 2014. The US-based super majors, Chevron and ExxonMobil, followed a similar trend, also reporting strong increases in their adjusted downstream earnings to US$ 1.387 billion and US$1.384 billion respectively in Q3 2014. Year on year things look even more positive; the total pre-tax adjusted downstream earnings achieved by the super majors in Q3 2014 totalled nearly US$6.9 billion, whereas in Q3 2013 the total was only US$2.9 billion. The overall improvement in the super majors’ downstream performance stands in stark contrast to recent upstream results, which were conversely affected by lower oil prices.

Other US Refiners

US_Refiners_Results_2014Q3_2

Source: Evaluate Energy (See note 2 for Adjusted Earnings Definition)

Other US downstream companies such as Phillips 66 (PSX), Tesoro Petroleum Corp (TSX), Valero Energy (VLO) and Western Refining (WNR)) saw their pre-tax adjusted earnings rise by 61%, 50%, 54% and 25% respectively from Q2 2014. Also, smaller US refiners (not included in the above chart), Alon USA (ALJ), Calumet Specialty Products Partners (CLMT), Delek US Holdings (DK), saw their downstream earnings increase to US$ 142.8 million, US$ 135.9 million and US$157.0 million, respectively. It is also important to note that Q3 was not perfect for all US refiners; Hollyfrontier and Marathon Petroleum both reported declines in Q3 2014 of 7.66% and 15.08% from Q2 respectively – attributed to higher operating costs incurred during the quarter – despite an overall improvement in results since Q1. Another US-based downstream company that did not have a good third quarter was CVR Energy (CVI), who recorded a fall by 83% in its downstream adjusted earnings on a year to year basis. This fall was attributable to the disrupted operations in late July at the company’s Coffeyville refinery in Kansas.

But, overall, Q3 2014 was clearly a good one for US refiners. However, while these positive results for Q3 2014 are a good thing, uncertainty still remains in the downstream sector, not only due to the volatility of oil prices, but also due to a problem of over-supply. Refining companies worldwide have been vulnerable to over-capacity for quite a long time now and with new projects due to come onstream next year in the Middle Eastern and Asia Pacific regions, this pressure will only increase.

Notes

1) The US refining segment “domestic players” include Alon USA,  Calumet Specialty Products Partners, Delek US Holdings, HollyFrontier Corp, Marathon Petroleum Corporation, Phillips 66, Tesoro Petroleum Corp, Valero Energy and  Western Refining

2) “Adjusted earnings” as referred to in this report represent pre-tax earnings after the removal of the one-off effect of non-recurring items, which included items such as impairments, gains/losses on asset sales, legal costs, and unrealised gains/losses on hedging agreements. This measure is important for benchmarking, as each quarter is more comparable to previous or following quarters.

This report was created using the Evaluate Energy financial and operating database, which is currently being updated with Q3 2014 results for the world's biggest and most important oil and gas companies as the data is released. Evaluate Energy also provides clients with an extensive M&A database, which holds all E&P deals back to 2008 as well as midstream, downstream and service sector coverage, and a global E&P and LNG assets database. Evaluate Energy also has a global refinery database, which includes information and performance data for every operational refinery and refinery project worldwide.

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International Influence Growing in Canadian Oil Sands

Posted by Mark Young

Nov 20, 2014 7:09:00 AM

According to CanOils new report “The Canadian Oil Sands Outlook 2015” the Canadian Oil Sands industry looks set to have capacity to produce over 3 million barrels per day (bbl/d) by the end of 2015, with production likely to approach around 2.5 million bbl/d. Of these figures, a higher portion than ever will be controlled by non-Canadian operators (see note 1), with the trend of greater influence year-on-year by internationally-held companies continuing into 2015.

Oil_Sands_Outlook_15_Chart_1

Source: CanOils – Shows gross production capacity controlled by Canadian and non-Canadian operators. This does not represent the working interest (i.e. net) positions of each company involved. Download full 2015 Outlook from CanOils here.

Assuming all scheduled new projects and expansions actually come onstream by December 31st, 2015 will see a 16.6% increase in overall year-end production capacity in the Canadian oil sands since 2014. 38.9% of this new total capacity will be operated by an entity that is owned (at least in the majority) by a non-Canadian company. This is the highest percentage by quite some margin since CanOils began tracking project capacities in 2008. This of course will be affected by delays and cancellations, so the full capacity will not be reached, but a significant increase will happen nonetheless.

The total has been growing steadily since 2012. In 2013, the increase can be attributed to two events. Firstly CNOOC’s acquisition of Nexen meant that the 72,000 bbl/d Long Lake in situ project shifted to international operatorship. Secondly, Imperial Oil’s Kearl Lake mine came onstream, adding another 110,000 bbl/d to the international contingent’s capacity total. 2014 saw OSUM Oil Sands taking the 10,000 bbl/d Orion project into Canadian hands by acquiring it from Shell for Cdn$325 million. But this dip was more than offset by major expansions at Shell’s Jackpine mine (expanded to 200,000 bbl/d, additional capacity of 100,000 bbl/d) and at Devon’s Jackfish in situ project (to 105,000 bbl/d, additional capacity of 35,000 bbl/d).

Oil_Sands_Outlook_15_5

Source: CanOils – Shows gross production capacity controlled by each operator. Not necessarily the same in all cases as working interest capacity owned. Download full 2015 Outlook from CanOils here.

2015, again assuming all planned projects reach completion by year-end, will see Imperial take over as the largest internationally-backed company in the Canadian Oil Sands. This is because of a planned expansion at the Kearl Lake mine, which is to double capacity to 220,000 bbl/d. This project alone highlights the fragility of making forecasts in the oil sands industry however, as production at the existing mine has recently been halted for several weeks due to some mechanical issues, potentially casting some doubt on an expansion to the mine reaching completion on time. Imperial is also scheduled to make a major 40,000 bbl/d expansion at Cold Lake next year.

Other planned increases in internationally-held production capacity within the oil sands industry in 2015 include Harvest’s brand new 10,000 bbl/d BlackGold project and ConocoPhillips’ 122,000 bbl/d expansion at its Surmont project, which will see capacity increase to around 150,000 bbl/d.

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Notes

1)      “Non-Canadian operators” refers to companies that operate an oil sands project (in situ or mining operation) that are held in the majority by a non-Canadian entity. Included in this group are a handful of companies that are headquartered in Canada, such as Imperial (ExxonMobil, US), Nexen (CNOOC, China) and Harvest (KNOC, South Korea), but the majority shareholder of the company is internationally-based.

CanOils provides efficient data solutions for oil and gas company analysis. The CanOils Oil Sands database is a comprehensive analysis tool for the oil sands industry in Canada, providing countless datasets for performance and benchmarking analysis, including production, capacities, environmental measures such as water use or greenhouse gas emission, onstream dates, all regulatory documents and much more.

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