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Oil and gas mergers and acquisitions are expected to surge with upwards of $50 billion in new U.S. deals for the rest of the year following a spring lull, according to a new report.
The land rush in West Texas’ booming Permian Basin largely ended last year, and now it’s time for the dealmaking and consolidation to take hold with U.S. oil prices hovering below $75 a barrel – near their highest levels since late 2014.
The spike in M&A activity is expected to be led by Australia’s BHP Billiton selling its roughly $10 billion portfolio in shale oil and gas assets in Texas, Arkansas and Louisiana, according to the report from Austin-based Drillinginfo, a leading oil and gas research and analytics firm. BHP holds major acreage in both the Permian and South Texas’ Eagle Ford shale.
Potential buyers including leading oil majors like BP, Chevron and Royal Dutch Shell, as well as private equity players. But BP is the rumored frontrunner, Drillinginfo noted, as the British energy giant seeks a major foothold in Texas shale opportunities akin to U.S. rivals Exxon Mobil and Chevron.
U.S. oil and gas M&A only hit $8.7 billion in the second quarter of this year, versus about $45 billion in the first six months of 2017. The $50 billion projected for the back half of 2018 would exceed that busy period in early 2017. In addition to so-called Big Oil majors, private equity players and international companies in Asia, Europe and the Middle East also are expected to become more active in the U.S., especially in onshore shale.
“We expect the logjam in quality asset packages to begin to move quickly in the second half of 2018 as the sub-$50 oil price risk is largely over,†said Drillinginfo senior director Brian Lidsky. “These are exciting times and buyers have plenty of choices to rapidly deploy capital.â€
Apart from Midland-based Concho Resources buying rival RSP Permian for about $8 billion, the first six months of 2018 have been relatively quiet in dealmaking. But Drillinginfo considers that the calm before the storm with companies now poised to strike.
As for BHP, the Australian mining giant bought big into U.S. shale in 2011, purchasing Houston-based Petrohawk Energy for about $15 billion, including debt, and Fayetteville shale acreage from Oklahoma City’s Chesapeake Energy for $5 billion.
But BHP took a big hit during the recent oil bust, writing down the value of its shale assets by $7 billion two years ago. The company is planning to get out of shale, considering the business too risky.
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Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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