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.

67 Unconventional Assets for Sale as of July 2011

There are many unconventional packages put up for sale, with most in the US or Canada. Given the flurry of unconventional deal activity recently, it wouldn’t be surprising if unconventional deal volumes and values reach record highs this year.

Jack Williams, president of the Irving, Texas-based ExxonMobil's XTO unit, which was acquired by ExxonMobil in June 2010, says that Exxon is looking to expand its shale gas holdings in more than a dozen gas-rich shale-rock formations worldwide. Exxon is also getting active internationally, starting hydraulic fracturing on formations in Poland this year and last week agreeing with China Petrochemical Corp. to jointly assess the resource’s potential in China. Although gas prices have been relatively low, Exxon is reportedly pleased with the returns they’re seeing with production from their unconventional assets, and particularly XTO’s assets.

This announcement by Exxon comes on the back of a series of multi-billion dollar deals involving unconventional (shale) transactions. Last week, BHP Billiton agreed to acquire Petrohawk Energy for $12.1 billion to expand its shale gas holdings in the US. Since June 1, companies including Exxon, Marathon Oil Corp. and Malaysia’s Petroliam Nasional Bhd have announced at least $7 billion worth of North American shale-gas deals.

The following table shows unconventional opportunities for sale recorded in Derrick’s “Deals in Play’ database, part of Derrick’s ‘E&P transactions’ database

Table 1: Unconventional opportunities available in US and Canada as of July 2011. Click on squares to get to the detailed deal sheet. Source: Derrick Petroleum Services. *HRB = Horn River Basin.
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There are currently 67 unconventional oil and gas packages for sale in the market. The majority of these packages are located in the USA (46) and most of them are either for unconventional oil (21) or unconventional gas (21). A large number of packages are for investments in undeveloped discoveries (30) and for investments in fields under development (20). Eagle Ford Shale has the most number of opportunities at 12 followed by the Marcellus Shale at 7. Most packages are related to selling undeveloped acreage (36), followed by Joint Venture related opportunities (17)

      

ConocoPhillips to shed $5- $10 billion worth assets in UK and North America......Who are the probable buyers???

ConocoPhillips plans to sell an additional $5 billion to $10 billion in non-core assets over the next two years, the proceeds to fund its share buyback and capital expenditure programs.

Chief Executive Jim Mulva told analysts the company plans to sell a total of $12 billion to $17 billion in assets in a three-year period, including at least $1 billion in refining and marketing properties this year. The dispositions include non-strategic assets in the North Sea and additional mature assets in the U.S. and Canada. The plan also includes a 15% stake in the Australia-Pacific liquefied natural gas project it agreed to sell last month to Sinopec.

Mulva told analysts that the additional asset sale target is expected to come on top of the $7 billion the company already sold in assets last year and excludes the $8.3 billion from the sale of its 20% stake in Russian oil giant Lukoil.

Shift from debt-fueled acquisition strategy to profitability improvement strategy

Conoco is in the midst of a restructuring plan started in 2010 to shore up its finances by selling assets. It initially didn't plan to sell refining properties until, aiming to avoid selling assets at deep discounts, but in October it said it would ramp up its sale of assets in 2011 amid a rebound in the industry.

The asset sales mark a shift from Conoco's debt-fueled acquisition spree when commodity prices were soaring. It also underscores the company's confidence that its "shrink-to-grow" strategy is yielding positive results among investors.

Impact of asset sale on production

ConocoPhillips expects its oil-and-gas production to be between 1.6 million and 1.7 million barrels of oil equivalent per day in 2013, down from 1.75 million barrels of oil equivalent per day it produced last year due to the impact of the asset sale program. However it expects output to grow 2% to 3% per year in the long term, driven mainly by the startup of projects in Asia, the North Sea and the U.S.

Proceed to be diverted to Capital Expenditure program

The company expects to use proceeds from the asset sales announced Wednesday to fund a $10 billion share repurchase program it had previously unveiled, and for capital investment. In a slide presentation, the company said it expects share buybacks to total $11 billion through 2012.

Conoco plans $13.5 billion of capital spending this year, with the vast majority targeted for exploration and development. It said it plans to invest $14 billion to $15 billion per year from 2012 to 2015.

Conoco said it plans to invest 50% more this year in projects in North America mainly aimed at increasing drilling activity in oil-rich shale areas such as the Eagle Ford in Texas and the Bakken Shale in North Dakota.

Conoco will not make any large-scale acquisitions,it will expand its presence in some areas such as the deepwater of the Gulf of Mexico through small scale deals.

The company said it plans to invest $1.4 billion in the APLNG project, which will be sanctioned by mid-year and have its first liquid natural gas delivery in 2015. Conoco is also planning to ramp up exploratory drilling in the Caspian Sea, with a new well planned for its Kazakhstan N Block offshore for late this year or early 2012. The company is also negotiating a production sharing agreement for Block 19 in Turkmenistan.