Privately held exploration and production (E&P) firms in the Eagle Ford Shale and Midcontinent regions could prove attractive targets for public producers seeking exposure to future strengthening of natural gas prices, according to Enverus Intelligence Research (EIR).
EIR’s Andrew Dittmar, principal analyst, highlighted the Eagle Ford, the South Central Oklahoma Oil Province (SCOOP) and the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties (STACK) regions as plays “with proportionally higher ownership by private equity-backed E&Ps likely to welcome an offer to be acquired by a public company.
“Both plays are also interesting from a commodity diversification perspective, with a mix of oil and gas production and an opportunity to capitalize on an eventual gas price recovery.”
Henry Hub natural gas prices have not surpassed $2/MMBtu since early February, according to NGI Daily Historical Data. Meanwhile, NGI’s Henry Hub Forward fixed price for winter 2024/2025 delivery stood at $3.441 as of Tuesday, according to NGI’s Forward Look.
In order for gas-directed drilling to be profitable, oil and gas executives in the Tenth Federal Reserve District, which includes Oklahoma, said on average Henry Hub prices would need to hit $3.47, according to a survey published this month by the Federal Reserve Bank of Kansas City.
Dittmar added, “The Eagle Ford has a gas window well-positioned to supply Gulf Coast LNG projects, albeit with a smaller total resource base” relative to the Haynesville Shale.
Meanwhile, E&Ps on the Gulf Coast, “whether in the Eagle Ford or Haynesville, could also see a further influx of interest from buyers based outside the U.S. Already, these plays have seen major acquisitions by Canada’s Baytex Energy Corp., United Kingdom-based INEOS and Japan’s Tokyo Gas Ltd., as well as a smaller nonoperated purchase by TotalEnergies SE.”
Dittmar’s comments accompanied the release of EIR’s first quarter 2024 tally of merger and acquisition activity among Lower 48 E&Ps, which totaled a robust $51 billion during the three-month period.
The gassy Haynesville “saw significant consolidation with the merger of Chesapeake Energy Corp. and Southwestern Energy Co.,” said the EIR team. “Unlike most other public deals that were focused on extending the years of high-quality inventory, that transaction didn’t necessarily improve Chesapeake’s years of inventory life at the combined rig count but did substantially boost its exposure to the Haynesville and opportunity to capture premium gas prices from burgeoning LNG exports starting in 2025.”
The oil and associated gas-rich Permian Basin dominated dealmaking during 1Q2024 as it usually does.
The largest deal was Diamondback Energy Inc.’s $26 billion acquisition of Endeavor Energy Resources LP, giving Diamondback “a scale comparable to Pioneer Natural Resources prior to its sale to ExxonMobil,” the EIR team said.
Other noteworthy Permian deals included APA Corp.’s $4.5 billion all-stock takeover of fellow public producer Callon Petroleum Co.
