DEAL ALERT (COP, CRGY, SBOW)

Energy Advisors Group has released an A&D Deal Alert as consolidation has continued thus far in 2Q24. This is a continuation of our Market Monitor Series and thought leadership efforts. The full 19-page Special Report highlights three consolidation deals:

1. ConocoPhillips buys Marathon for $22.5 billion
2. Crescent Energy buys SilverBow for $2.1 billion (Eagle Ford)
3. Aethon Energy buys Tellurian's Haynesville assets for $260 million

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:

------- Going, Going, Gone! “Since the start of 2023, we’ve said goodbye (ordered by size >$1 billion) to Pioneer, Hess, Endeavor, Marathon, CrownRock, Southwestern, PDC, Denbury, Callon, Earthstone, Enerplus, Rockcliff, Ranger, SilverBow, Aera, Advance, Novo and QuarterNorth in addition to In-Basin asset consolidations.”

------- Content  “In 2Q24 thus far, consolidation is roaring ahead with ConocoPhillips buying Marathon, Crescent Energy taking SilverBow and Aethon acquiring Tellurian’s upstream assets.”

------- Contrast “COP’s $22.4 B for Marathon brings 390,000 boepd contrasted with $13.3 B paid in 2020 for Concho (319,000 boepd) and its biggest deal in 2005 paying -$35.6 B for Burlington (478,000 boepd).” 

------- Context “Sourcing Enverus, since the start of 2023, there has been $244 B (21 deals) in corporate buys (>$1 B) and $25 billion (94 deals) in all other deals – a remarkable top-heavy consolidating market.”

Here is our version of Heard on the Street (Market Insights) ---

1. Making Up For Lost Time: "They're all the same underpinnings including acreage and inventory," Matt Willer, managing director and partner at Phoenix Capital, told Yahoo Finance. "Recognizing oil and gas isn't going anywhere during our lifetime, producers] are making up for lost time. 
2. Shrinking Landscape: We’ve gone from 65 to 41 public US E&Ps in less than five years, Jon Hughes with Petrie Partners cited in the Financial Times. “We are in the midst of a consolidation wave and I don’t think it is over yet.” Companies are casting a wider net.
3. Scott Sheffield Fights Back: “The FTC is wrong to imply that I ever engaged in, promoted or even suggested any form of anti-competitive behavior,” per Scott Sheffield, continuing “It also shows how publicly and unjustifiably vilifying me will have a chilling effect on the ability of business leaders in any sector of our economy to address shareholder demands and to exercise their constitutionally protected right to advocate for their industries.”
4. On COP & MRO: “While others have targeted inventory and growth, COP/MRO looks largely based around costs optimization in the Eagle Ford and Bakken shales which are mature assets for bothcompanies,” said Citi’s Alastair Syme and his colleagues reported on Market Watch.
5. Crescent & SilverBow: “I think SilverBow needed to do something, in light of what Kimmeridge was attempting to do there,” Trauber said at Super DUG. But he said a number of other potential buyers were looking over SilverBow. Despite that, “they didn’t wait for others to submit offers.”
6. Kimmeridge: Mark Viviano, managing partner and lead portfolio manager at Kimmeridge EnergyEngagement Partners, said at Hart’s SUPER DUG Conference in Ft. Worth, TX, that the firm found out about the deal on May 16 like everyone else.
7. Devon Has Yet to Seal a Deal:  Devon has lost bids to acquire at least three of its peers in the last 12 months. Rick Muncrief, CEO, said in its 1Q earnings call that we have “a very, very high bar” and “we need something that makes us stronger? per Reuters.
8. Eagle Ford: “The Eagle Ford remains one of the most fragmented basins in the Lower 48 with substantial opportunity for further growth,” Crescent CEO David Rockecharlie said during a May 16 conference call with analysts.
9. Decades of Demand: Odessa American reports, “In fact one of the motivations for the recent spate of mergers is the desire to accumulate large quantities of relatively low-carbon shale reserves in anticipation of the demand being strong for decades to come”, per Ray Perryman, economist.
10. Exxon Swagger: ExxonMobil rediscovers its swagger and reports the way the SEC goes about excluding frivolous proposals is “flawed”. ExxonMobil roundly rejected shareholder proposals to expand emissions reduction by including targets to limit indirect emissions from the supply chain and the end use of hydrocarbons with The Economist reporting the ideas as somewhere between impractical and suicidal - the fund’s proposal sought not to create shareholder value but rather to make the company “shrink”.
11. And then... Perfect Storm: Goehring & Rozencwajg noted natural gas pessimism in March was the worst in history w/ WTI trading at 52x HH. Most importantly, dry gas supply likely peaked in December 2023. The US is set to shift from a prolonged period of acute oversupply to a structural deficit of historic proportions. The natural gas market represents the perfect storm w/ US gas demand set to grow at the fastest rate in history from now to 2030 while gas production appears to have peaked. We believe N. America gas will converge w/ the global price.

#1---

Here one of several slides on ConocoPhillips buy of Marathon

#2---

Here is a summary slide on Crescent Energy purchase of SilverBow

#3---

Finally, a summary of Aethon's acquisition of Tellurian's Haynesville assets

The FULL 19-page report is available for download to the right.

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.

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