OPINION: One could be forgiven for thinking that M&A (mergers and acquisitions) is the new wildcatting if recent events are anything to go by.
M&A activity is firmly back on industry’s centre stage with several key deals being agreed of late — some of which the market had been expecting or had earlier got wind of, and others which Upstream has learned came as a total surprise to even most senior management.
In Asia Pacific, following Eni’s purchase earlier this year of Chevron and Neptune Energy’s respective Indonesian E&P assets, observers have now turned their focus to which companies are eyeing SapuraOMV Upstream — the 50:50 joint venture between Sapura Energy and OMV.
Firm bids for SapuraOMV are now expected as early as later this month although the transaction will likely not close until 2024.
While the touted $1.2 billion price tag is dwarfed by Chevron’s $53 billion purchase this week of compatriot Hess and ExxonMobil’s recent $59.5 billion merger with Pioneer Natural Resources, whichever company snaps up SapuraOMV will probably be paying cash.
The similarity between these deals though is striking, though. Players are once again keen on snapping up producing assets that generate immediate cash flow plus the employees that are successfully producing those assets.
And if the acquisition comes with discoveries ripe for exploitation and/or exploration upside, so much the better.
Meanwhile, this month’s announced larger acquisitions by ExxonMobil and Chevron have started analysts’ tongues a’wagging: “Could the earlier mooted tie-up between UK supermajors BP and Shell be back in the frame?” and “What now for Oxy?” have been heard in recent days.
Occidental Petroleum (Oxy) saw 3.5% wiped off its share price on Monday in the wake of Chevron’s revelation of its intended takeover of Hess.
Chevron had been viewed as a potential suitor for compatriot Oxy but US supermajor Chevron apparently decided it had a sufficient position in the Permian and that Hess’ Guyana holding was too attractive to pass over.
Observers and analysts are also now speculating on what upstream assets, if any, Chevron will look to divest from its enlarged upstream portfolio following its acquisition of Hess.
Its quarry in the fourth quarter 2022 achieved net production of 67,000 barrels of oil equivalent per day from its North Malay basin and Malaysia-Thailand Joint Development Area acreage.
While this output level is none too shabby, Chevron in recent years has scaled back its Southeast Asian E&P interests — either by choice or because it was unable to secure the hoped-for extension.
If these soon to be ex-Hess regional producing assets do come back on the market, they too will likely prove attractive for companies preferring the — relative — security of acquisition versus spinning the drill bit.
(This is an Upstream opinion article.)