Billion Dollar Energy Deals Still Coming Despite Weaker Market

by: Evaluate Energy

In a week that saw oil prices crash from recent highs on the back of a flurry of poor economic data across the globe, the E&P sector remained bullish. Two potential billion dollar deals were announced, according to our analysis of this week’s deals.

One deal that was definitely in excess of a billion dollars was the further divestment of a 10% stake in YPF Sociedad Annima (NYSE:YPF) by Repsol (OTCQX:REPYF)-YPF to the Petersen Group for $1.3 billion.
Repsol has been steadily decreasing its interest in its South American-focused subsidiary following increased government intervention and taxes, especially within Argentina and Bolivia. The value of YPF has remained flat in the previous four years and is currently 38% lower than its peak in 2005. Repsol will be hoping that the money raised on the sale will see a better return from its intended target in the deepwater resources of Brazil. Following this deal, Repsol’s stake in YPF- which once stood at 98%- will decrease to 58%. That's just 7% shy of its target final interest in YPF of 51%.

The other potential billion dollar deal came from Chevron’s (NYSE:CVX) acquisition of 228,000 acres in the Marcellus shale play from Chief Oil & Gas. The terms of the transaction were undisclosed but as the cost per acre in the Marcellus shale play can range from $4,000 per acre for an undeveloped asset to over $10,000 per acre for a partially developed property, the estimated price could be between $1-$2 billion. Judging by Chevron’s disclosure that the acquisition is likely to add 5 trillion cubic feet of gas reserves, it’s likely that the consideration will lie in the middle to high portion of this estimate.

In Canada, Crew Energy (OTCPK:CWEGF) sealed a transformational deal, which will almost double the company’s production whilst increasing the liquids weighting of the company’s portfolio of assets. Crew is acquiring Caltex Energy Inc, a company with liquids-rich gas assets in the Peace River area and heavy oil operations in the Lloydminster area of Saskatchewan for C$623 million. The normalised cost per proved boe equates to C$19.65, which looks to be at a slight premium to an assumed fair price of C$17 based on the resource type and stage of development.

The Gulf of Mexico-focused, Dynamic Offshore Resources completed its eighth transaction since its inception in 2008 with the $42.5 million acquisition of Gulf of Mexico shelf assets. The price looks attractive at just $5.85 per proved & probable boe. Even factoring in the $16 million of increased asset retirement obligations that the properties will add, the normalised cost per proved and probable boe still equates to barely over $8.

Top Deals of the Week

Acquirer Target Company Target Business Segment Brief Description Total Acquisition Cost (000)
Petersen Group YPF Sociedad Anonima Integrated Grupo Petersen exercises its option to acquire a further 10% of YPF from Repsol-YPF 1,304,000
Kinder Morgan Energy Partners, L.P. Petrohawk Energy (NYSE:HK) Midstream Kinder Morgan Energy Partners acquires a 50% interest in KinderHawk Field Services (the natural gas gathering and treating services provider in the Haynesville Shale) and a 25 percent interest in Petrohawk's natural gas gathering and treating business in the Eagle Ford Shale 920,000
Crew Energy Ltd Caltex Energy Inc. E&P Crew Energy acquires Caltex Energy Inc., a private Canadian based E&P company 652,055
Dynamic Offshore Resources, LLC Unspecified E&P Dynamic Offshore Resources acquires Gulf of Mexico properties via two transactions 42,500
Japan Australia LNG (MIMI) Pty. Ltd Tap Oil Limited (OTCPK:TAPOF) E&P Japan Australia LNG, a 50:50 joint venture between Mitsubishi and Mitsui acquires a 25% interest in WA-351-P in the Carnarvon Basin in Australia from Tap Oil 40,154
Paxton Energy Inc Virgin Oil Company, Inc. E&P Paxton Energy, Inc. acquires Virgin Oil Company, Inc. 14,700
Eurogas Corp. Torque Energy Inc. (OTC:TQEEF) E&P Eurogas Corp acquires Torque Energy Inc. 8,368
Ante5, Inc. Twin City Technical, LLC; Irish Oil and Gas, Inc. E&P Ante5, Inc acquires 8,000 acres in the Bakken shale play from Twin City Technical, LLC, a North Dakota limited liability company, and Irish Oil and Gas, Inc. 6,035
Pluspetrol ROC Oil E&P Pluspetrol Angola Corporation acquires ROC Oil's remaining 10% interest in the Cabinda Onshore South Block, Angola 5,000
Chevron Chief Oil & Gas LLC E&P Chevron acquires 228,000 acres of Marcellus shale acreage from Chief Oil & Gas LLC for an undisclosed price Undisclosed

EvaluateEnergy tracks every global upstream deal on a daily basis, estimating normalised deal value, in-depth financial and operating detail behind each deal and an explanation and opinion on deal rationale . Normalised deal value reveals underlying reserve values.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.