Independent E&Ps looking to unload some of their shale real estate in the Permian basin are not generating much interest from the majors. A number of big oil companies—ExxonMobil, Royal Dutch Shell and Chevron included—have all gone on record stating that they are wary of buying up assets from smaller companies at a time of large global crude surpluses and unsteady crude prices.
This is not great news for independents facing dwindling shareholder returns in the Permian after years of costly exploration and buying sprees. The general consensus among majors seems to be that most independents are simply asking too much for their assets, creating a misalignment between the two camps. The CEOs of Exxon and Conoco both stated a need for would-be sellers to ease back their expectations for acquisition interest to pick up again.
And last month, Chevron was outbid by Occidental Petroleum (Oxy) for the purchase of Anadarko Petroleum. Chevron stated a commitment to cost discipline as the reason for walking away from the deal, while Oxy reportedly quadrupled its debt (to nearly $40 billion) to secure Anadarko. Oxy must not only sell some of Anadarko’s non-US shale assets to cut their debt, but they must deal with the ire of some high-profile investors—most notably Carl Icahn. The activist investor, who owns some $1.6 billion of Oxy shares, has filed a lawsuit against Oxy for its “fundamentally misguided and hugely overpriced” bid for Anadarko. In early July, Oxy asked its shareholders to reject a new bid by Icahn to call a special board meeting aimed at ousting nearly half of Oxy’s current board.
Meanwhile, Shell has been shopping around for a deal in the Permian for several months. The major was reportedly in talks with Endeavor Energy Resources, a private company with 350,000 acres in the Midland basin, back in January. To date, the companies have not announced a deal. Check back with EnergyMakers Advisory Group as we continue tracking deal making developments like these.