EIA: Oil company finding costs reached a 10-year low in 2018

The U.S. Energy Information Administration (EIA) has used Evaluate Energy data to show that the finding costs for 116 global exploration and production companies hit a 10-year low in 2018, while finding and lifting costs combined were similar to costs recorded in 2017.

This was just one conclusion in the EIA’s oil and gas annual financial review, which is all built using data available through an Evaluate Energy subscription.

Among it’s other key findings:

  • Brent crude oil daily average prices were $71.69 per barrel in 2018, which was 35% higher than 2017 levels
  • The 116 companies analyzed in this study increased their combined liquids and natural gas production 2% from 2017 to 2018
  • Proved reserves additions in 2018 approached their highest levels in the 2009–18 period
  • The companies reduced debt in 2018 by more than $60 billion, the most for any year in the 2009–18 period
  • Refiners’ earnings per barrel declined slightly from 2017 to 2018

The EIA’s annual review is available to download at this link.

For more on the benefits and features of an Evaluate Energy subscription and to find out how to conduct similar analysis yourself using our tools, click here to sign up for a demonstration.

Brazil leads in Latin America with over $12 billion in M&A deals

A new report from Sproule, the Daily Oil Bulletin and Evaluate Energy shows how, among Latin American nations, Brazil has secure by far the highest level of M&A investment in upstream oil and gas.

The full report, which looks at the past five years of deal activity and the key drivers in Brazil, Argentina, Colombia and Mexico, is available to download here.

Led chiefly by investment from Norway’s Equinor ASA, over the past five years Brazil has received $12.4 billion in asset and corporate deals or farm-in agreements. Only 9% of 2019 Latin American deals up to and including April 30, 2019 involved assets outside of Brazil.

Source: Latin America: Assessing the impact of oil prices and the political climate on upstream M&A activity – Download here.

Brazil has also enjoyed a great deal of success in bidding rounds.

This new report analyzes:

  • The companies involved in Brazil’s bidding rounds since 2014;
  • How much was spent to win the blocks on offer; and
  • How Brazil’s success in attracting outside investment to new exploration acreage has grown over time.

Download the full M&A report from Sproule, the Daily Oil Bulletin and Evaluate Energy at this link.

Latin America: 5 key takeaways from Sproule, DOB and EE M&A activity report

A new report from Sproule, the Daily Oil Bulletin and Evaluate Energy shows how politics and fluctuating oil prices continue to dominate headlines and influence appetite for investment in Latin America’s upstream oil and gas industry.

The full report is available to download at this link.

Five key takeaways

1. Government changes impact M&A appetite across the region

  • Mexico’s change in government led to the suspension of licensing bid rounds and delayed farm-out arrangements;
  • Brazil’s change in government has had less of an impact domestically, so far, on oil and gas development. The country continues to pursue offshore opportunities and create an onshore sector; and
  • Argentina’s presidential elections are scheduled for October. The current administration made energy self-sufficiency a strategic goal and a new government may revert to a prior regulated domestic market structure.

2. Upstream M&A deal values dropped 64% in 2018 compared to 2017. 2019 also began slowly until a $1.3 billion deal was agreed in Brazil in April.

Source: Latin America: Assessing the impact of oil prices and the political climate on upstream M&A activity

3. Brazil remains the clear leader in terms of the value of M&A deals, while Colombia has seen the largest number of deals agreed.

4. Equinor (formerly Statoil) is the key driver behind deal activity in Brazil since 2014. The company has invested $5.3 billion in Brazilian asset acquisition since the latter half of 2016.

5. Canadian companies dominate in Colombia. Of the 73 M&A deals in Colombia between 2014-2018, more than 50% involved an acquiring company headquartered in Canada at the time of the deal.

Download the full M&A report from Sproule, the Daily Oil Bulletin and Evaluate Energy at this link.

Two years of deals create new 90,000 boe/d Appalachian Basin producer

Evaluate Energy’s review of Q1 M&A activity sheds further light on the rapid growth of one U.S. oil and gas player operating in the Appalachian Basin.

Thanks to its latest acquisition, for $400 million, Diversified Gas & Oil Plc now produces more than 90,000 boe/d. That deal saw them pick up 20,700 boe/d in assets in Pennsylvania and West Virginia from HG Energy II Appalachia LLC.

The purchase is Diversified’s second largest, behind a $575 million acquisition in June last year from EQT Corp. Two years ago, Diversified produced under 7,000 boe/d.

Full details can be found in the latest Evaluate Energy upstream M&A report, available for download here.

Source: Evaluate Energy Global Upstream M&A Review – Q1 2019

Dismal Q1 sees global upstream oil and gas deals fetch just $9.8 billion

Evaluate Energy’s latest M&A report analyzing global upstream activity shows that just $9.8 billion of new oil and gas M&A deals were agreed during the first quarter of 2019.

This represents a 61% drop on spending in Q4 2018 and a 75% drop compared with Q1 2018.

Low oil prices and changing spending priorities were the two main causes. The full report is available now at this link.

Source: Evaluate Energy Global Upstream M&A Review – Q1 2019

While upstream spending in Canada ground to a halt almost entirely, assets in the United States attracted the bulk of Q1 activity, accounting for 60% – or $5.9 billion – of global upstream spending.

Nonetheless, this was still the lowest spend on U.S. upstream assets since Q1 2015 and a 67% drop from the $17.7 billion recorded in Q4 2018.

Equally, the highest price M&A activity was an offer made by a hedge fund to acquire Permian Basin producer QEP Resources Inc. that is just one option being considered by the target company.

If this deal comes to nothing, Q1 2019 would be the worst individual quarter for U.S. upstream deal-making over the last 10 years.

Evaluate Energy’s M&A review for Q1 2019 is available to download now and includes analysis on the following:

  • The changing spending priorities of upstream companies that weakened M&A appetites
  • Two years of acquisitions that created a 90,000 boe/d producer in the Appalachian Basin
  • Major asset sales around the world by Chevron, Murphy and Marathon Oil

Canadian upstream M&A hits $11.2 billion in 2018

In another year where North American deals dominated upstream M&A activity, Evaluate Energy’s latest Global M&A review shows that Canada saw US$11.2 billion in new deals announced in 2018. The full M&A review can be downloaded at this link.

This US$11.2 billion appears a major drop from the total value of deals in 2017 (US$32.0 billion) – this value, however, was skewed by a handful of major oilsands sector deals in the first quarter worth a combined US$24.3 billion.


Source: Evaluate Energy M&A Database

2018 almost had a major oilsands deal of its own – that is, before Husky Energy’s attempted US$4.9 billion takeover of MEG Energy was terminated last week. Husky decided that it would not extend the offer that expired Wednesday without receiving the necessary two-thirds support.

“Husky’s share price rose immediately after this announcement by 13%, which arguably shows that Husky’s shareholders were not enamoured with a deal taking place in the current pricing environment,” said Eoin Coyne, Evaluate Energy’s senior M&A analyst and author of the Evaluate Energy 2018 review.

“At C$11 per share and US$4.9 billion, the deal would have been the fourth largest in the Canadian oilsands sector since the start of 2014, but it seems now that we’ll have to wait and see if any further big-money consolidation will take place in the Canadian oilsands patch after the raft of activity early last year.”

Evaluate Energy’s M&A review of upstream deals in 2018 is available at this link. The report includes details on global deal-making trends, the largest upstream deals of the year in Canada and around the world, as well as an in-depth look at a huge year for deals in the United States.

Spending is down but deal count is up as U.S. dominates 2018 M&A activity

Despite some positive signs of stability in oil and gas markets during 2018, the overall M&A spend in the upstream sector globally fell to its lowest level in at least a decade. The value of announced upstream deals reached just $132 billion; a 12% decline on the $151 billion recorded the year prior even though oil prices enjoyed their best year since the 2014 price downturn.

This was the key conclusion in Evaluate Energy’s global M&A review for 2018, which can be downloaded here now.

Source: Evaluate Energy M&A Report 2018

“One crumb of comfort was evident in the increased level of underlying M&A activity,” said report author Eoin Coyne, a senior M&A analyst at Evaluate Energy. “The number of ‘significant’ deals – those with a value greater than $10 million – increased year-on-year by 9.5%, reaching their highest level since 2014. Similar increases were visible in the number of deals greater than $50 million and $100 million.”

While global values fell, the United States in particular had a big year.

“As usual, North America dominated global deal values,” he added. “Just over $93 billion in new deals were announced in the U.S. and Canada, representing 71% of the global $132 billion total. The U.S. saw the world’s four biggest deals as part of the $82 billion contributed within the U.S. That’s a 24% increase over the $66 billion in new U.S. deals in 2017.”

Source: Evaluate Energy M&A Database

For detailed analysis on the world’s biggest upstream M&A deals this year, download the Evaluate Energy M&A review of 2018 at this link.

Latest Guidance: Painted Pony Energy to cut capex by highest amount among North American gas producers

According to data available in the Daily Oil Bulletin’s latest guidance report, Painted Pony Energy Ltd. is set to cut its capital spending this year by a greater margin than any other North American natural gas-focused producer (see note 1).

The latest weekly corporate guidance review from the DOB can be accessed at this link. This week’s edition includes data for 67 Canadian- and U.S.-based upstream companies, along with a detailed look at recent guidance announcements from Husky Energy Inc., Baytex Energy Corp. and Whitecap Resources Inc., among others.

Comparing final guidance for 2018 and latest guidance for 2019, Painted Pony expects its capital expenditures to fall by around 34%, a much greater margin than any of the other 18 natural gas-focused producers to have reported 2019 guidance in North America so far.

Source: Daily Oil Bulletin Corporate Guidance Review, Dec 17, 2018 – Jan 4, 2019

Cost efficiency and capital discipline is the clear focus for Painted Pony: “Establishing a range of capital spending in 2019 and a commitment to limit spending to match anticipated internally generated adjusted funds flow from operations provides Painted Pony the flexibility to shift capital spending based on changing market prices,” said Pat Ward, president and CEO of Painted Pony.

The Daily Oil Bulletin’s weekly guidance report is put together using upstream company guidance data provided by Evaluate Energy.

For a demonstration of the Evaluate Energy North American guidance product, click here.

Note
1) Any company with a portfolio that was made up of more than 50% natural gas in Q3 2018 is included here as a “natural gas-focused producer.”

EIA: Energy company free cash flow continues to grow

Research conducted on a group of energy companies by the U.S. Energy Information Administration (EIA) has shown that free cash flow– the difference between cash from operations and capital expenditure – was $149 billion for the four quarters ending September 30, 2018.

This analysis was part of EIA’s Financial Review of the Global Oil and Natural Gas Industry for Q3 2018, a report compiled using financial and operating data supplied by Evaluate Energy. The full list of companies included in the study group can be found in the EIA’s report.

This $149 billion was the largest four-quarter free cash flow sum seen across the entire the five year period between 2014 and 2018 and is a clear continuation of recent trends, as shown in the EIA’s chart below. While the group’s capital spending has slowly increased over the past two years, it has been consistently outstripped by increases in cash from operations.

Stronger oil prices in 2018 are the main cause behind the increase in cash generated from operations, but this growth in free cash flow is also caused by a combination of factors that have shifted the group’s focus away from capital spending. Some companies are buying back shares, while some are stockpiling cash and exercising caution when it comes to capital budgets. Other companies are continuing to pay off debt; EIA’s report also shows that it is now eight quarters in a row where debt for the study group was reduced.

Q3 2018 data shows that the number of companies with positive free cash flow is also growing. 50% of the EIA’s study group had positive free cash flow in Q3 2018, which has increased from around 35% back in Q1 2018.

A closer look at the Evaluate Energy data that was used to build the EIA report shows that it was unsurprisingly the world’s larger companies that had the largest levels of free cash flow.

Company Name

Q3 2018 – Free Cash Flow ($ billion)

PetroChina

7.6

Chevron Corporation

6.4

Royal Dutch Shell

6.4

ExxonMobil

5.9

BP Plc.

5.9

Sinopec

5.7

Rosneft

5.1

ENI

4.2

Petrobras

4.1

Equinor ASA

3.9

Source: Evaluate Energy

For more on the Evaluate Energy data used to build the EIA’s quarterly review, please request a demonstration of the Evaluate Energy database here.

Energy companies have now reduced debt for 8 consecutive quarters

Research conducted by the U.S. Energy Information Administration (EIA) has shown that energy companies have now reduced debt for eight consecutive quarters – or two full years.

This sustained debt reduction contributed to Q3 seeing the lowest long-term debt-to-equity ratio (40%) for the group since third-quarter 2014.

This analysis was part of EIA’s Financial Review of the Global Oil and Natural Gas Industry for Q3 2018, a report put together using financial and operating data supplied by Evaluate Energy.

Of the group that the EIA studied for this quarterly review, a closer look at Evaluate Energy’s data shows that only five companies reduced debt by more than 10% in Q3 2018 compared to Q2 2018.

Company Name Gross Debt, Q3 2018 ($ million) Debt Reduction vs. Q2 2018
TransGlobe Energy Corporation 53 16%
Berry Petroleum Corporation 392 14%
TransAtlantic Petroleum Ltd. 26 14%
Carrizo Oil & Gas, Inc 1,328 12%
SM Energy Company 2,593 11%

Source: Evaluate Energy

The greatest reductions in debt in pure dollar terms were predictably among the bigger companies of the EIA’s study group. Brazil’s Petrobras reduced gross debt by $3.6 billion between Q2 and Q3 2018, while Russia’s Rosneft, Chevron and PetroChina were close behind with respective reductions of $2.7 billion, $2.4 billion and $2.4 billion.

The full EIA report, along with the entire list of companies that were used to create the analysis above, is available to download from the EIA at this link.

Click here for a demonstration of the Evaluate Energy database that was used by the EIA to create the report.