Page 12 - NorthAmOil Annual Review 2021

NorthAmOil M AY NorthAmOil

Rush of M&As continues

for US oil and gas

US oil and gas mergers and acquisitions continue apace, with

the trend not limited to the Permian Basin alone

US THE wave of consolidation that started last year acquisitions are solidifying Pioneer’s dominant
in the US oil and gas industry continues apace, position in the Permian Basin – its sole area of
WHAT: with a handful of new deals being announced in focus.
The uptick in US oil and early 2021. The trend is not limited to the prolific
gas M&As that began last Permian Basin alone, with other shale regions Beyond the Permian
year is continuing. including Colorado’s Denver-Julesburg (DJ) Pioneer is not the only company consolidating
Basin and the Northeast’s Appalachian Basin its Permian position over the past few months.
WHY: also seeing mergers and acquisitions (M&As) However, the trend is being seen across other
Producers are pursuing recently. basins as well.
scale in an effort to boost This comes as shale producers continue to Most recently, Bonanza Creek Energy said
performance, and taking look to scale and free cash flow (FCF) gener- it was merging with Extraction Oil & Gas
advantage of stronger oil ation opportunities to improve their perfor- in a $2.6bn deal that would make the com-
prices. mance, while practising restraint when it comes bined company – which will be called Civitas
to new drilling. And new sources of capital Resources – the largest pure-play producer in
WHAT NEXT: remain scarce, with many of the recent deals the DJ Basin. The deal has been described as a
A leaner shale industry, being all-stock transactions as a result. More merger of equals, with Bonanza and Extraction
comprised of a handful recently, producers are also seeking to take shareholders set to own 50% each of the new
of dominant players, advantage of stronger oil prices, which allow company once the transaction closes in the third
is expected to result them to benefit more from producing proper- quarter of 2021.
from this wave of ties that they acquire. The merger comes after Bonanza Creek
consolidation. The consolidation trend is helping to reshape emerged from bankruptcy protection in 2017
the shale industry, from one dominated by with a reduced debt load, illustrating how
many small independents in its early days to bankruptcy does not necessarily spell the end
one increasingly concentrated in the hands of for oil and gas producers. Now, Bonanza Creek
a few larger players. And as most of these dom- and Extraction expect the merger to help boost
inant companies support acting with restraint, performance, saying that Civitas is projected to
this bodes well for oil prices after booming be “one of most well-capitalised companies in The consolidation
shale supply previously contributed to price the industry”.
crashes. The companies described the DJ Basin as trend is helping
being characterised by “low operating costs, to reshape the
Big spender extensive infrastructure, ample takeaway,
There have been several major deals announced multiple producing horizons and responsible shale industry.
recently, including by companies that have energy production”. They have also pledged that
made other major acquisitions not too long ago. Civitas will be Colorado’s first net-zero oil and
Among these was Pioneer Natural Resources, gas producer, in terms of direct Scope 1 emis-
which announced in April that it was acquir- sions and indirect Scope 2 emissions, which are
ing DoublePoint Energy in a deal worth $6.4bn related to electricity that is purchased and used
including debt. This came after Pioneer closed its by a company. The two firms expect to achieve
$7.6bn acquisition of Parsley Energy in January. this through an “intensive, continuing focus
(See NorthAmOil Week 14) on reducing operational emissions and a mul-
After the DoublePoint deal closed in early ti-year investment in certified emissions offsets”.
May, Pioneer had spent roughly $14bn on News of the merger came days after EQT
acquisitions over a period of around six months. announced that it had agreed to acquire Alta
The company’s aggressive approach makes it Resources for $2.9bn in a deal focused on
the most active acquirer since the coronavi- the Appalachian Basin. That transaction will
rus (COVID-19) pandemic pulled the energy expand EQT’s position in the Marcellus shale
industry into another downturn early last year, gas formation, giving the company a foothold
according to energy analytics firm Enverus. The in a part of the region that it is not yet present

P12 www. NEWSBASE .com Annual Review 2021