Page 5 - NorthAmOil Week 04 2022

NorthAmOil COMMENTARY NorthAmOil

The Powder River Basin
has seen comparatively
little M&A activity to
date.

commodity prices and a better M&A market to for development. However, the basin remains
make an exit. Enverus estimates that there has at an early stage of development, with recent
been over $15bn in private and private equi- trends among shale producers such as holding
ty-backed sales of upstream companies since back on new drilling no doubt contributing to
the start of 2020. the relative lack of activity. The basin currently
produces about 143,000 barrels per day (bpd)
Changing hands of oil and 680 mmcf (19.3 mcm) per day of gas,
Dittmar noted that with the Marcellus and according to Platts Analytics estimates.
Haynesville forming the core of Chesapeake’s Now, with West Texas Intermediate (WTI)
portfolio, along with the Eagle Ford shale in prices up nearly 48% on a year ago, shale pro-
South Texas for oil opportunities, it was a matter ducers could be more willing to ramp up drill-
of “when and not if” one of its remaining non- ing, albeit with caution. This bodes well for less
core assets was sold. developed shale regions such as the Powder Continental’s
Chesapeake has said it will use proceeds from River. And Dittmar said Continental “clearly
the sale to help pay for the Chief acquisition. For likes the rock” in the basin, which also seems expansion into
Continental, meanwhile, the transaction repre- like a good sign for the region. new plays is not
sents the chance to build up a position in a play it The assets that Chesapeake is selling consist
entered last year through its acquisition of Sam- of 172,000 net acres (696 square km) and 350 limited to the
son Resources’ assets in the basin for $215mn. operated wells, with estimated output of 19,000
“Continental’s interest in expanding in the barrels of oil equivalent per day (boepd) in the Powder River
Powder River provided the perfect opportunity fourth quarter of 2021. Crude and natural gas
for a large-scale sale in a basin that has seen lim- liquids accounted for roughly 58% of produc- Basin.
ited M&A activity,” Dittmar said, adding that tion from the properties.
Continental’s move was likely motivated by a Continental’s expansion into new plays is not
maturing asset base in the Bakken play and lim- limited to the Powder River Basin. In December,
ited M&A opportunities there. Pioneer Natural Resources sold its assets in the
“A focus on the Powder River is a bit more Permian Basin’s Delaware sub-basin to Conti-
surprising and differentiates Continental from nental for $3.25bn.
its large cap peers, some of which have opera- In another interesting development, Chesa-
tions in the basin but none of which have made peake’s former CEO, Doug Lawler, who quit the
it a target for M&A,” Dittmar said. company last year shortly after its emergence
Analysts have said the Powder River has the from bankruptcy protection, will shortly be
potential to be prolific, with several stacked joining Continental in the role of chief operat-
plays that are considered to be promising targets ing officer.™

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