North American independents will further slim down to stay afloat in the low commodity price environment, with billions of dollars in asset sales and joint ventures planned for the second half 2012.
North American independents will slim down further to stay afloat in the low commodity price environment, with billions of dollars in asset sales and joint ventures (JVs) planned for the second half of 2012.
United States and Canadian independents have already announced a rash of new deals this year, many involving the sale of part, or all, of unconventional onshore properties. For many companies, these sales have been critical to meeting funding needs.
Encana, Chesapeake and other independents have sold interests in a range of emerging and mature unconventional assets to eager buyers – including Asian national oil companies, major oil companies, energy asset management firms and private equity players.
Select North American independents’ 2012 asset sale proceeds targets
|Seller||2012 proceeds target ($bln)||Completed year-to-date ($bln)||2013 proceeds target ($bln)|
Source: company information
“The JV market is still strong, and it’s been supplemented by the interest of private equity players during that past year or so,” said Chesapeake Chief Executive Aubrey McClendon during the company’s second-quarter earnings call on Tuesday. “It has probably been the biggest change in the market in the past year, which [has seen] the arrival of tens of billions of dollars of assets that private equity players have brought to the table.”
Chesapeake has raised its minimum target for asset sales this year, from $11.5 billion to $13 billion, and the company’s efforts to form a new JV in the Mississippi Lime play have attracted a variety of potential buyers. “There is obviously private equity interest, and international interest, we’ve also been approached for 100% exit in some parts”, McClendon said.
Texas-based Quicksilver Resources is in discussions with several interested parties for a JV in the Barnett shale, and “in detailed negotiations” on additional JVs outside the Barnett, said Chairman Toby Darden during the company’s second-quarter earnings call on Wednesday.
The company has said it is looking for potential partners in the Horn River, and in the Midland and Delaware basins of West Texas.
EOG Resources, which has traditionally shied away from joint ventures, announced one earlier this year in the Tuscaloosa Marine shale, and is considering bringing a partner into another horizontal oil play. However, the company is reluctant to part with a stake of any of its ‘Big Four’ oil plays: the Eagle Ford, Bakken, Permian Basin and Barnett Combo.
Planned and potential North American asset deals in the second half of 2012
|Seller||Assets for sale or under consideration||Deal type|
|Chesapeake||Chesapeake Midstream Development||Asset sale|
|Permian Midland (sold to Enervest)||Asset sale|
|Permian Delaware 1||Asset sale|
|Permian Delaware 2||Asset sale|
|DJ Basin||Asset sale|
|Utica Shale||Asset Sale (Portion of acreage)|
|Utica Shale Oil||JV|
|Utica Shale Dry Gas||JV (2013)|
|East Texas Woodbine||Asset sale|
|Horizontal Oil Play*||JV|
|Encana||Eaglebine, US liquids-rich plays||Third-party investment|
|Alberta Duvernay||Third-party investment|
|10% of Cutbank Ridge||JV|
|Alberta Deep Basin||JV|
|Marcellus Midstream (long-term)||Undisclosed|
|Midland and Delaware Basins||JV|
*Separate from asset sales; excludes Eagle Ford, Bakken, Permian Basin, or Barnett Combo. Source: company information
Devon has tentatively floated the possibility of unloading some of its Canadian assets. “We’re confident that we’re going to have success on some of the exploration opportunities we’re pursuing in Canada,” Executive Vice-President of Exploration and Production Dave Hager said during the company’s analyst day in April. “What’s less clear to us is what the scale of those opportunities [will be], and are they going to effectively compete for capital within our portfolio.”
Consultancy IHS Herold said it expected global mergers and acquisitions to accelerate this year, driven by well-financed entities like national oil companies and sovereign wealth funds capitalising on smaller, cash-strapped companies’ efforts to shed non-core assets (see Consolidation to pick up in 2012 – IHS Herold, 3 April 2012). [/private]