01Q24 QUARTERLY M&A REPORT

THIS IS THE ABBREVIATED MEDIA VERSION

Energy Advisors Group has released a Q1 2024 Special Report on the U.S. A&D marketplace as a continuation of our Market Monitor Series and thought leadership efforts. The full 33-page Special Report provides perspectives on past and current trends in deal values, counts, plays and valuations. Also included are forward looking themes as buyers and sellers look to navigate a plethora of dynamics impacting oil and gas prices, capital availability and costs, deal quality, regulatory and energy transition impacts, play economics, technology and geopolitical risks.

Energy Advisors Group has over 35 years of experience assisting clients navigate the marketplace to maximize their portfolios as advisors on both the sell and buy side. Energy Advisors also provides consulting services including asset management and optimization.

Here are our quick quotes, and takeaways from our report along w/ three slides.

Quick Quotes:

------- "How was the first quarter? High value, low flow! Twice the value but half the deal flow. Boring but not?! Overall market being driven by market consolidation." 

------- "Marriages & Mergers! Diamondback takes Endeavor, Chesapeake takes Southwestern, Chord takes Enerplus, Talos takes QuarterNorth, California Resources takes Aera…and the beat goes on.”

------"Takeaway: Buyers are bidding gas up even as current spot prices drop and the opposite is happening for oil. So much for conventional wisdom…bigger factors are at play."

------“Despite gas inventories slightly above average, when compared to demand, storage is at all time lows"

------"Deals managed to get done DESPITE the fact that oil and gas spot prices ran counter to their forward curves with oil (backwardated futures) RISING from $70 to $84 in the quarter and gas (contango futures) FALLING from $2.56 to $1.54. Most did not see this coming.”

Takeaways from 1Q 2024---

1. Reminder don’t be fooled. While top line remains robust for U.S. upstream at $51B, the underlying market is slow;
2. Low natural gas prices, rising oil prices & a hostile Washington delivered what you might expect, low deal count & consolidation;
3. On Jan 11, Chesapeake paid $11.5 billion in stock for Southwestern at market as it puts an exclamation point on its gas pivot & at 7.3 Bcf/d pro forma instantly becomes the largest independent gas producer gaining global relevancy; 
4. Just a month later, Diamondback spent $26 billion in cash and stock buy of prized and long sought after Midland private Endeavor Energy (located across the street) in a deal that took just 66 days from initial call to PSA. Together, the two Midlander now surpass 800,000 boepd net in the Permian;
5. Heading west, California Resources Corp does a $2.1 B stock & debt deal to buy Aera, the original 1997 combination of Shell/Mobil's West Coast assets;
6. Interestingly, Shell & Exxon sold Aera in late 2022 to IKAV, a German asset manager who then sold 49% to Canada Pension Plan Investment in Feb. 2023;
7. In the Gulf, Talos buys of QuarterNorth Energy for $1.3B for cash & stock that's accretive, including a lower ARO/boe metric; QuarterNorth owns assets won via a credit bid from Fieldwood’s bankruptcy;
8. A sign of the times. APA Corp (fka Apache) spends $4.5B in stock to buy Permian-focused Callon Petroleum (14% premium, deal tops it almost forgotten $3.9 billion buy of Mariner Energy back in 2010);
9. Not exactly a surprise, the FTC delays closings on "Chesapeake/Southwestern, Exxon/Pioneer, Chevron/Hess” – while most analysts expect these reviews to have little impact on plans;
10. Continuing last year’s trend, 76% of deal currency this quarter came in the form of buyer equity that effectively continues to keep things in check as investors demand that acquisitions bring accretion to key metric –ultimately keeping the industry’s balance sheets healthy;
11. Liquids! Like year, oil assets lead the market taking 8 out of the top 10 deals;
12. P/E exits from the top names were silent this quarter after a flurry of exits last year and no doubt P/E are in reloading and seek mode;
13. In a public display, high profile Kimmeridge stalks SilverBow to beef up an Eagle Ford gas portfolio that has enough scale to leverage itself to LNG linked pricing; but SilverBow.. says "No Deal;“…;
14. Natural Gas Conundrum. Natural gas prices swoon to historic lows in 1Q24 just as most forecasters see a surge in demand coming, from new LNG capacity and AI driven data centers; But when?!
15. Natural Gas. Obviously, natural gas buyers are trying to buy in advance of LNG but the challenge is closing the gap with sellers. 

#1---

Here is additional insight from the report taken from one of our slides:

#2---

Here are some quick comments on thematic drivers

#3---

Here is more commentary from our abbreviated version some of the market's drivers:

The 9-page media report is available to the right.

Interested parties desiring to see the whole 33 page report should email any one of us down below for the complete version.

Energy Advisors Group is working hard to expand our thought leadership and look forward to providing additional market insight for our clients through regional perspectives, M&A analysis and market monitor. 

Our firm has been serving the needs of buyers, sellers and capital providers for over thirty-five years.

TO LEARN MORE AND RECIEVE A COPY OF THE FULL REPORT CONTACT:

Blake Dornak

Vice President

Phone: 713-600-0169

– Email: [email protected]

Brian Lidsky

Director

Phone: 713-600-0138

– Email: [email protected]

Ronyld W Wise

Founder & Managing Partner

-- Email [email protected]

Corporate Office:

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Houston TX 77027

Corporate Switchboard: 713-600-0123