Trend for acquisitions of private companies will continue, as public companies seek to expand presence in lucrative US play
NORWALK, CONN. – A special study that compared well performance of private versus public companies operating in the Bakken/Three Fork shale play in North Dakota yielded a surprising result — smaller, private companies have some of the best acreage and wells in the region, even when compared to larger, publicly traded entities, says study author, information and insight provider IHS.
View the most recent OGFJ100P production data on US-based private E&P companies.
The IHS Herold 2011Special Study on Company Performance in the Bakken/Three Forks Play analyzed approximately 1,450 horizontal wells completed in the Middle Bakken or Three Forks formations in Mountrail, McKenzie Williams and Dunn counties in North Dakota since 2006. The study compared the median wells’ average production in its first, second and third months online.
“A number of private companies ranked very well with public companies, delivering median first-month production that was similar to that of highly regarded publicly traded E&P (exploration and production) companies, albeit having much smaller well counts,” said Sven Del Pozzo, study author and senior principal energy equity analyst at IHS. “Based on well performance alone, we think most of the private entities mentioned in this report are nearly certain to attract interest from potential suitors.”
According to the report, merger and acquisition (M&A) values for undeveloped acreage in the play continue to set new highs. Well performance, the report noted, is generally strong, but varies considerably, which, with buyers “paying up” for acreage, Del Pozzo said, which “leaves little margin for error in drilling” to fulfill pre-acquisition expectations.
“We believe the trend of acquisitions of private properties will continue,” Del Pozzo added, “since most of the prospective acreage is already leased and few alternatives exist to establish or meaningfully expand a company’s presence in the Bakken/Three Forks play. Size is the primary driver of an acquisition, since a small lease holding can’t move the needle for a big, publicly traded company.”
Source: IHS
