on the strategy and organization of the energy industry
On April 1, Pioneer Natural Resources announced an acquisition of DoublePoint Energy: “DoublePoint has amassed an impressive, high quality footprint in the Midland Basin, comprised of tier one acreage adjacent to Pioneer’s leading position. We are pleased with their decision to become long-term partners with Pioneer in a transaction that will complement our unmatched position [...]
It’s worth asking why an oil company would ever acquire a competitor. If the company has an existing resource base, they could, instead, drill and produce that. They could also explore for new resource, whether close to existing operations or in new frontiers. In either case, the choice is not for new resource per se, [...]
WPX Energy Merges With Devon Energy “Shale didn’t work because folks threw too much money at it to grow too quickly,” Pickering said. “It feels like we now have the play book.”“This deal represents the form of shale company consolidation that many across the industry have been looking for,” said Andrew Dittmar, a mergers and [...]
Industry consolidation can come from two sources. First, companies can acquire or merge (M&A) with other companies. Second, high cost operators can lose market share to low cost operators. In Consolidating What, I wrote that consolidation through M&A in the U.S. shale-patch is less likely today due to heavy sector indebtedness and generally poor asset [...]
“By now it should be abundantly clear that the current shale business model does not work – even for the very best companies in the industry…it is obvious that the shale oil industry needs to be restructured and the remaining companies need to pivot toward [a returns focused business model]…there should be only a handful [...]
Much discussion in the energy industry is about price. After price, the conversation turns to supply and demand. From there, it sort of fizzles out down various trails lacking guided explanation only to return, once more, to price. This is for good reason. As with other commodities, price is universally binding throughout the industry. There [...]