HE RAPID "DOUBLE DIP" SLIDE of WTI oil futures since late June (trading below $40/bbl as of Aug. 24) is shaking up whatever common ground buyers and sellers found this spring when prices broke above the $60/bbl mark. In the current pricing environment, PLS research indicates that the most prolific region for dealmaking continues to be the Permian Basin. Unconventional development in the Wolfcamp, Spraberry and Bone Spring plays remains some of the best in the industry, particularly on acreage where these formations exist as stacked objectives. Outside the Permian, public E&P firms continue to find fresh capital for drilling programs-even in this low-price environment-by striking creatively structured JV deals with private equity partners.
Only two acquisitions YTD with announced values cracked the $1 billion mark, and both included Permian assets-Noble/Rosetta for $3.85 billion and WPX/RKI for $2.75 billion. ExxonMobil may have just made the third with the addition of 48,000 acres to its Midland Basin position. Applying a $23,845/acre metric reported by Diamondback Energy in a Midland Basin deal in May would put Exxon's price tag at $1.14 billion, while an implied $16,450/acre metric from a Parsley Energy bolt-on deal last December would yield a value of $790 million.
Indeed, Exxon could have paid considerably more. RSP Permian announced a $274 million Midland Basin bolt-on acquisition three days earlier, to which most analysts are assigning metrics of $34,000-$35,000/acre after applying a $50,000 per boe/d value to existing production.
AZZ Price at posting:
50.0¢ Sentiment: Buy Disclosure: Held
