That's an order of magnitude drop in mergers and acquisitions.Drillinginfo said:AUSTIN, TX, April 04, 2019 (GLOBE NEWSWIRE) -- Drillinginfo, the leading energy SaaS and data analytics company, reported today that U.S. oil and gas M&A deal values have plunged to a record 10-year low in the first quarter of 2019. A slump that began in late 2018 has carried over into the new year and the $1.6 billion in Q1 deals is down 91 percent from Q4 2018, and down 93 percent compared to Q1 2018. The slump follows the $82 billion in deals in 2018 that set a four-year record high.
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Remaining consistent with Drillinginfo analysts predictions at the start of the year, a confluence of factors drove deal values down, including the rapid 40 percent drop in oil prices in late 2018. The primary contributing factor appears to be Wall Street's pressure to deliver on free cash flow and weak equity and debt markets available to fund deals. Meanwhile, private equity – which has in recent cycles stepped in as an opportunistic buyer to take advantage of pullbacks by public E&Ps – has largely sat on the sidelines.
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Ultimately, 2019 could be a watershed year for U.S. shale. If free cash flow is reliably demonstrated, Wall Street's approval is likely to return along with capital for deals. Given the current backlog of assets, there could be a rapid return of activity once the outlook improves.
How are the companies doing?
Sanchez Energy, once trading at $38 per share, was delisted from NYSE late Feb for repeatedly failing to meet $1/share [Chron, now trading at 11¢ as of today. By intended drilling activity, measured in number of permits, this was the #2 company in Eagle Ford, compared to EOG's #1 [ref], the latter also leading by production, according to some] reporting on Permian's loss being Eagle Ford's gain last fall.
Companies compared to Oct 2018 peak, except Laredo Petroleum late Sep 2018:
Company | OctPeak | Jan19 | Now | Oct↦Now | MktCap |
Sanchez Energy | - | - | 0.11 | **** | -99% |
LPI Laredo Petroleum | 8.80 | 3.74 | 3.12 | -65% | 0.746B |
OAS Oasis Petroleum | 14.22 | 5.54 | 6.15 | -57% | 1.99B |
SM SM Energy | 33.47 | 15.34 | 15.96 | -52% | 1.81B |
WLL Whiting Petroleum | 54.51 | 22.21 | 27.69 | -49% | 2.57B |
CPE Callon Petroleum | 12.84 | 6.55 | 7.50 | -42% | 1.71B |
CLR Continental Res. | 71.79 | 41.96 | 47.79 | -33% | 18.09B |
WRD Wildhorse Res. | 23.72 | 17.38 | 16.97 | -28% | 1.73B |
CXO Concho Res. | 159.96 | 106.69 | 118.11 | -26% | 23.29B |
EOG Resources | 132.35 | 90.61 | 97.84 | -26% | 56.27B |
PXD Pioneer Nat. Res. | 187.92 | 134.30 | 164.94 | -12% | 28.00B |
Main Oil Companies: | |||||
CVX Chevron Corp | 126.82 | 110.69 | 117.08 | -8% | 224.25B |
BP | 46.99 | 38.59 | 43.30 | -8% | 114.94B |
XOM Exxon Mobil Corp | 86.51 | 69.69 | 80.49 | -7% | 338.52B |
SRSrocco, which describes this situation as a bloodbath, also points out that despite being an apparently comparable to the main oil companies, had a negative cash flow for a long time.
Wall Street Journal said:Shale Companies, Adding Ever More Wells, Threaten Future of U.S. Oil Boom: Newer wells drilled close to older wells are generally pumping less oil and gas and could hurt output, leading frackers to cut back on the number of sites planned and trim overall production forecasts ... Shale companies' strategy to supercharge oil and gas production by drilling thousands of new wells more closely together is turning out to be a bust. What's more, the approach is hurting the performance of older existing wells, threatening the U.S. oil boom and forcing the maturing industry to rethink its future.
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Newer shale wells drilled close to older wells are generally pumping less oil and gas than the older wells, according to early corporate results. Engineers warn the new wells could produce as much as 50% less in some circumstances. ... The newer shale wells often interfere with the output of older wells, because blasting too many holes in dense rock formations can damage nearby wells and lower the overall pressure, making it harder for oil to seep out. The moves could potentially cause permanent damage and lower the overall amount recovered from a reservoir.
In other words, the new wells drink the milkshake of the old ones, as can be seen visually from the ever-increasing steepness of oil production by year of first flow:
Related news:
Bloomberg said:Infected U.S. Shale Oil Is Being Turned Away by Asian Buyers
As various types of crude pass through the supply chain from inland shale fields spanning Texas to North Dakota, they risk picking up impurities before reaching Asia -- the world's biggest oil-consuming region. Specifically, refiners are worried about the presence of problematic metals as well as a class of chemical compounds known as oxygenates, which can affect the quality and type of fuel they produce.
Two refiners in South Korea -- the top buyer of U.S. seaborne supply -- have rejected cargoes in recent months due to contamination that makes processing difficult. Growing North American output from dozens of fields pushes everything from highly-volatile oil to sticky residue through shared tributaries and trunk pipes. Smaller carriers then take cargoes from shallow-water ports to giant supertankers in the Gulf of Mexico for hauling to far-away buyers.[/code]