Devon Energy and Coterra Energy’s newly announced merger didn’t come as a huge surprise. They have highly complementary assets in the Permian and the Anadarko and their deal promises $1 billion or more in synergy-related savings. Finally — and this is important — their combination had been urged on by an activist investor.
There’s been a frenetic scramble among oil and gas producers through the early 2020s to acquire top-tier acreage and production assets they think they will need to survive and thrive. Some of those acquisitions are still being done through smaller deals such as acreage swaps, but the expansion mode of choice for most has been big-time M&A, which in a single multibillion-dollar deal can add years to a company’s inventory life or perhaps give it a stronger foothold in a key production region or two. In today’s RBN blog, we discuss Devon Energy’s recently announced $5 billion acquisition of Grayson Mill Energy, yet another private-equity-backed E&P cashing in on the smart moves it has been making.
Way back in 2015, the Eagle Ford Shale in South Texas was big news, duking it out with the Permian and the offshore Gulf of Mexico for the #1 spot in crude oil production and with the then-preeminent Haynesville for top honors in natural gas output. But the mid-decade crash in oil and gas prices hit the Eagle Ford harder than any other U.S. production area — in fact, production there remains below its peak seven years ago. Lately, however, M&A activity in the shale play has been surging, suggesting that the Eagle Ford may finally be on the verge of a serious, sustained comeback. In today’s RBN blog, we discuss this renewed interest in South Texas and whether this time the play’s recovery is for real.
Buoyed by still-elevated crude oil, natural gas and NGL prices — and discipline on capital spending and production growth — U.S. E&Ps have been generating unprecedented cash flow and using much of that bounty to reduce debt, increase dividends and buy back shares. A number of producers have also been investing some of that cash to expand their holdings, mostly to complement their existing acreage in the Permian and other plays and thereby allow for increased efficiency and, in many cases, longer laterals. Few have been doing more in this regard lately than Devon Energy, the Oklahoma City-based E&P, which completed a big bolt-on acquisition in the Bakken in late July and just followed that up with a plan for an even bigger buy in the Eagle Ford. In today’s RBN blog, we look at the company’s strategy.
The STACK shale play west/northwest of Oklahoma City has quickly emerged as one of the hottest hot spots, and two “sweet-spot” counties in the heart of the play rank near the top nationwide in drilling activity. For now, the primary focus of the small group of producers active in STACK (for “Sooner Trend Anadarko Canadian Kingfisher”) isn’t on production, it’s on gaining a more complete understanding of the play’s complex geology, which offers (as acronym luck would have it) a bona fide stack of hydrocarbon production layers (including the particularly promising Meramec) that together may offer off-the-chart volumes. Today, we consider a play that can provide some producers a 75% rate of return at $45/bbl oil and $2.25/MMBtu natural gas—that is, at prices 11% to 13% lower than they are today.
Crushing oil prices are hitting U.S. shale producers hard and the outlook for 2016 shows little sign of a let-up. Production has continued to prove resilient but the odds are that something has to give at these prices. However there are still sweet spots in U.S. shale plays where producers are increasing acreage and drilling new wells. The headline plays that many analysts talk about are the Delaware and Midland basins in the West Texas Permian but as we outline in today’s blog there is also continued interest in the relatively less well-known central Oklahoma SCOOP and STACK plays.
Refineries located close to booming Eagle Ford shale production have nameplate capacity to process over 900 Mb/d of crude but can only consume 375 Mb/d of local output today. That is because the larger refineries in Corpus Christi were built to process heavy sour crude oil instead of ultra light Eagle Ford. New additions will expand light crude capacity by 100 Mb/d in 2015 (in addition to planned condensate splitters). Today we detail Devon and Genesis pipeline projects as well as regional refining capacity.
