- We believe Chevron’s bid for Anadarko is well timed from a stock price standpoint as well as strategically, since the companies’ assets complement each other in several areas.
- The Permian Basin is a strategic focus for global integrated oil companies, which want to expand their presence there, as seen by Occidental’s counter offer for Anadarko.
- Takeover targets should be “needle movers” for the majors, which need substantial additional scale to justify any premium paid for Permian operators.
The surge in mergers and acquisitions that some predicted would quickly follow Anadarko Petroleum’s agreement to be bought by Chevron for $33 billion may turn out to be more of a steady trickle. That’s as large integrated oil companies take time to assess their options rather than rush to snap up exploration and production (E&P) companies at any price from fear of missing out.
Media and market commentators were quick to forecast a bidding war after Anadarko accepted a $65 per share cash and stock offer from Chevron on April 12. While the bid from the second-biggest U.S. oil company by sales and market value was topped by Occidental Petroleum’s $38 billion cash and stock offer on April 24, it doesn’t mean companies such as ExxonMobil, Total, Royal Dutch Shell or BP will now feel pressured to quickly boost at any cost their positions in the Permian Basin, the overarching rationale behind Chevron’s swoop for Anadarko.
Chevron’s bid is well timed. While it agreed to pay a 39% premium to Anadarko’s closing price of $46.80 the day before the deal was announced, the stock is trading at a significant discount to the $112.69 it closed at on Aug. 29, 2014.
The tie-up also has obvious synergies.
Anadarko’s 250,000 net acres largely abut a portion of the 2.2 million net acres Chevron holds across the Permian, the largest oil field in the U.S., which spans portions of west Texas and the southeast corner of New Mexico. That the acreage of Chevron and Anadarko is largely contiguous helps significantly with operational and logistical efficiency.
Similar synergies also exist in the Gulf of Mexico, where the companies’ assets are in close proximity, while the purchase would also add Anadarko’s future liquid natural gas (LNG) project in Mozambique to Chevron’s Australian LNG business.
In addition to run-rate cost reduction forecasts of $1 billion before tax, and capital spending cuts of $1 billion within a year of closing the purchase, Chevron expects a positive contribution to free cash flow and earnings per share a year after closing, contingent on a Brent crude price of $60 a barrel, while it also figures to bring in $15 billion to $20 billion from unspecified asset sales between next year and 2022.
But those are ancillary considerations. By taking out Anadarko, Chevron is sending a signal that the Permian is a strategic imperative and no matter how substantial its presence there, it aims to get bigger.
The attraction of the basin is the ability to tap oil reserves in as many as eight distinct levels of rock, compared with one or two such intervals or benches in other shale formations.
That substantially improves returns by allowing surface infrastructure to be used time and again, helping to cut the breakeven price per barrel to the mid-high $30s range for many Permian wells.
However, decline rates that typically cause output to drop by up to 70% a year after a well is drilled mean significant capital is needed to maintain – let alone increase – production. That, coupled with logistical bottlenecks (such as pipeline, trucking, road, labor and oil-field services capacity constraints), means success in the Permian favors larger operators.
然而，在钻井后通常导致产量每年下降高达70％的下降率意味着需要大量资金来维持 - 更不用说增加 - 生产。这加上后勤瓶颈（如管道，卡车运输，道路，劳动力和油田服务能力限制），意味着二叠纪的成功有利于更大的运营商。
A further headwind for smaller E&Ps is the cost to develop well sites. While a typical drilling pad houses one or two wells, some companies are now putting more than 20 wellheads on a pad, which benefits those with sophisticated procurement departments because wells that are grouped closely make it more efficient to get large amounts of sand, water and other drilling services and equipment to each site. But to build out a 20-well pad demands a commitment of $100 million or more for 12 months or longer before the facility comes online, a severe impediment for smaller E&Ps.
Yet the 430 or so rigs in the Permian – about half the U.S. onshore total – are currently run by about 110 individual companies, with more than 50% managing three rigs or fewer, which leaves plenty of scope for consolidation. But while there is no shortage of potential targets, an additional 20,000 or so acres doesn’t significantly improve the position of companies the size of Exxon, Occidental, BP, Shell or Total.
然而，二叠纪的大约430个钻井平台 - 约占美国陆上钻井总量的一半 - 目前由大约110家公司运营，超过50％的钻井平台管理三个或更少的钻井平台，这为整合留下了足够的空间。但是，虽然不存在潜在目标，但额外的20,000英亩土地并没有显着改善埃克森，西方，英国石油，壳牌或道达尔公司的规模。
The list of needle movers is therefore short, including Permian pure-play names such as Concho Resources, Pioneer Natural Resources, Diamondback Energy, Parsley Energy and privately held Endeavor Energy Resources. Behind those is a second tier of prospects with multi-basin exposure that includes EOG Resources, Cimarex Energy and Noble Energy.
因此，针式推动器清单很短，包括Permian纯粹名称，如Concho Resources，Pioneer Natural Resources，Diamondback Energy，Parsley Energy和私营Endeavour Energy Resources。其背后是第二层多层次的潜在客户，其中包括EOG Resources，Cimarex Energy和Noble Energy。
The issue for the majors is defending any price paid. In addition to its large acreage position, Pioneer may be of interest because of potential cost synergies: Wolfe Research projects that Pioneer’s selling, general and administrative costs per barrel will be the third-highest in a 15-company peer group in 2020. But is that enough to justify a purchase premium similar to the one Anadarko commanded on top of the 30% appreciation in Pioneer’s stock through April 16 this year?
Others on the shopping list, such as Diamondback and EOG, run fairly lean, making it tough to make cost synergy arguments for them. When it becomes difficult to claim that a new owner can make operational improvements, the question turns to scale. Integrateds might argue that the Permian is best served by a handful of large operators that can extract greater logistical efficiencies.
So while Chevron’s move for Anadarko will no doubt lead to the creation of a lot more spreadsheets at the large integrateds, we may not see a torrent of acquisition activity, as companies opt to carefully analyze their options to avoid overpaying for assets that they might then struggle to squeeze operational efficiencies and scale from. While the potential long-term rewards are clear, mistakes can be costly in the Permian, where hasty and expensive acquisitions can impair returns and destroy shareholder value. In the race for acreage, it may be more prudent to be the tortoise than the hare.