No Significant Change in Number of 'Deals in Play' So Far In 2011 In North America

There are no big changes in the numbers of 'deals in play' as measured on 1 Jan, 2011 & 1 Aug, 2011. Apart from an increase by 10 in Aug 1, 2011, the number of opportunities and their spread between country, sub-region/ plays, shales, and conventionals/ unconventionals remains largely the same. This analysis is based on opportunities recorded in Derrick’s “Deals in Play’ database as on 2 different dates: 1 Jan, 2011 and 1 Aug, 2011. Only opportunities where deal values are equal to or greater than $100 million have been considered for this analysis. The following charts show the split up of the number of opportunities vs Sub Region/ Play Type. Additional insights gleaned from this information are presented below.

Chart 1: Number of opportunities Vs Sub Region/ Play Type on 1 Jan, 2011. Source: DPS

Chart 1: Number of opportunities Vs Sub Region/ Play Type on 1 Aug, 2011. Source: DPS


On  Aug 1, 2011, there were 78 assets for sale in North America (US and Canada) with asset/ project values greater than $100 million. This is an increase by 10 in the number of deals in the market in this region as compared to Jan 1, 2011.

On Aug 1, 2011, the most number of deals in play were from Alberta, Canada at 14 (17.94%), for conventional assets/ projects. Deals in play from Alberta were also on top on Jan 1, 2011 at 11 or 16.17% of all opportunities.

Marcellus Shale related packages hold 2nd and 3rd place, in terms of number of packages for sale, as of Jan 1, 2011 & Aug 1, 2011, at 10 & 8 respectively. These numbers have remained constant for both these periods.

On Jan 1, 2011, there were 45 opportunities in the US (66%) and 23 in Canada (34%) as compared to 47 in the US (60%) and 31 in Canada (40%) on Aug 1, 2011.

On Jan 1, 2011, there were 28 (41%) shale opportunities as compared to 34 (44%) on Aug 1, 2011.

On Jan 1, 2011, there were 34 (50%) opportunities related to conventional hydrocarbons compared to 38 (49%) on Aug 1, 2011. On Jan 1, 2011, 34 (50%) opportunities were for unconventional hydrocarbons and on Aug 1, 2011, 40 (51%) were for conventionals.

E&P Opportunities in Asia in 2011

There are 33 opportunities recorded and analysed in Derrick’s ‘Deals in Play’ database for the 2 previous years till date (July 2011). A sample of these opportunities is shown in the chart below.

Indonesia has the highest number of opportunities at 9 followed by the Philippines at 5, India and Myanmar at 4 each and Vietnam at 3. Pakistan has 2 opportunities and Bangladesh, Brunei, China, Lebanon, Malaysia and Sri Lanka have 1 each.

There is 1 corporate M&A and 18 exploration/ developing undeveloped discoveries opportunities. 1 opportunity is related to producing fields and 3 are related to fields under development. 9 opportunities are for new exploration awards by governments/ NOC’s and 1 opportunity involves a mix of asset types.

Table 1: Sample of E&P Opportunities available in Asia with sellers, country and year of announcement shown. Hover over squares for additional information. Click on squares to go to the deal sheet in the ‘Deals in Play’ database (Pop ups need to be allowed).

Derrick has valued 5 deals where valuation was possible (e.g., asset sales). The sellers here are
a.GeoGlobal Resources
b.Union Fenosa Gas
c.Hycarbex-American Energy
d.Inpex
e.ConocoPhillips
For further information click on the companies above.

For information about Derrick Petroleum Services ‘Deals in Play’ database write to sanjay.samuel@derrickpetroleum.com or sales@derrickpetroleum.com.

Shell Canada Seeks JV Partner to Develop its Canadian Deep Basin Nikanassin Play in its Chinook Asset

Main Features

a.       Shell Canada is seeking a JV partner to develop its Nikanassin Play in its Chinook Asset and has engaged TD securities as its exclusive financial advisor.

b.      Offering 25 – 50% equity in its lands to JV partner.

c.       Seeking cash with a capital component.

d.      Level of carry is a function of term and working interest acquired.

e.      Term is anticipated to be 3-5 years.

Figure 1: Map location of the Chinook Asset. Source, TD Securities.

Chinook Asset Summary

a.       Located in Deep Basin of Western Canada (See Figure 1)

b.      Average Shell working interest is ~ 90%

c.       Area covers ~ 102,000 mostly undeveloped gross acres

d.      Resource potential is large with 12 Tcf OGIP with Shell estimated recoverable resource > 4Tcf

e.      Shell has invested in infrastructure and facilities  resulting in lower operating costs (as low as $0.55/Mcf)

f.        Currently producing ~ 35 MMcf/d with plans to ramp up to 150 MMcf/d by 2015 and possibly 250 MMcf/d or higher.

Nikanassin Formation Summary

a.       Present across the deep basin with gas trapped in stratigraphic and structural settings.

b.      Thick, stacked siltstone – sandstone reservoir sequence

c.       OGIP of 60 – 80 Bcf/ Section is higher than all other area formations 

Nikanassin compared to other North American shales by TD (Broker)

Figure 2: Comparison of various parameters between the Nikanassin and other similar unconventional plays. Source, TD Securities. 

Benefits for JV partner

a.       Shell is a major player with extensive capabilities and experience in unconventional plays.

b.      Reduced drilling costs by 50%

c.       50% reduction in drilling time

d.      40% reduction in completion costs

e.      Prior investment capital has already flowed into project.

Shells Current Activity at Chinook Asset

a.       Drilled three horizontal wells in Q4-2010, all tied in and initially producing > 5 mmcf/d

b.      Completed drilling first syncline well in Q1-2011 (Figure 3) which is awaiting completion and tie-in Q2-2011

c.       Plans to drill second syncline well and four development wells in remainder of 2011

Figure 3: Subdivision of the Nikanassin play according to Shell. Source, TD Securities. 

Recent activity by other operators

Source, TD Securities. 

Analyst Comments

Derrick estimates the value of this deal to be between $25 - $100 million assuming a 50% JV based on acreage metrics from the June 2011 activity land sales published by the Canadian government.

E&P Opportunities in West Africa & South-West Africa

West Africa is fast becoming a hotspot for the global oil and gas industry. A string of spectacular finds has shown this area to be a new petroleum province with multi billion barrel potential. The majors are there, and so are many smaller players. According to Derrick Petroleum’s “Deals in Play’ database, as of July 2011, there are 76 opportunities available and recorded in the whole of Africa . Out of this, 22 opportunities are in West and South-West Africa (Table 1).

Map: Opportunities are represented by the colored stars. Place cursor over stars for information. Subscribers can click the stars for detailed information from Derrick's "Deals in Play' database. 

There are >20 opportunities recorded in the Derrick “Deals in Play’ database. By far, most opportunities are for exploration activity, followed by opportunities related to developing discoveries. One big M&A opportunity is recorded and some producing assets are put up for sale.  Equatorial Guinea and Angola have the most opportunities (4 each). In Angola, ExxonMobil is looking to exit Block 31 and INA-Naftaplin has put its assets up for sale for which combined deal values exceed $2 Billion according to Derrick Petroleum estimates. 

The following figure is a breakdown of opportunities in Africa from Derrick's "Deals in Play' database. 

List of E&P Companies for Sale/ Looking at Strategic Alternatives in 2011

“Strategic alternatives may include, but are not limited to, a sale of the corporation, a merger or other business combination, a farmin or farmout, an acquisition or disposition of assets, among other alternatives"

In 2011, 26 companies were looking for strategic alternatives and so far only 4 of these deals have been completed! From the Derrick ‘Deals in Play’ database, 21 companies are looking to sell or are considering strategic alternatives. Opportunities involving Canadian companies represent ~ $1 billion with more than 33 MMBOE of proved reserves and ~ 17 MBOE/d of production

The tables below show these companies along with their reserves and production profiles. Subscribers to Derrick’s database can get detailed information on each deal by clicking the bars (login required).

Chart 1: Canadian companies that are up for sale or considering strategic alternatives. Companies have been sorted by deal value. Hover over colored squares for more information. Subscribers can click on the squares for a detailed deal breakdown (login required). Source, Derrick E&P Transactions Database.

Chart 2: Global companies that are up for sale or considering strategic alternatives. companies have been sorted by deal value. Hover over colored squares for more information. Subscribers can click on the squares for a detailed deal breakdown (login required). * Maurel&Prom's principal assets are in Gabon. However they also have assets in other countries. But for this discussion Gabon is given as principal country. Source, Derrick E&P Transactions Database.

Analyst comments:
1. Most of these companies are private.
2. By far, the biggest deal here is Exco Resources which is looking at strategic alternatives, not excluding the possibility of putting up the company for sale. Derrick's analysts place the deal value in the range of $1 - $10 billion.
3. Most companies that have been put up for sale and/ or considering strategic alternatives  so far are Canadian (62%). Every other country is only represented once (either for sale or considering other strategic alternatives). 
4. In 1H 2010, 18 companies were put up for sale and most them have been sold. In the corresponding time in 2011 (1H 2011), 26 companies have been put up for sale. This is an increase in corporate sales by 44%. Apart from other factors, this also likely reflects higher oil prices.