Category Archives: E&P

Behavioral finance in oil and gas – Oil & Gas Financial Journal

WHY DO EXPLORATION and production companies make more acquisitions, buy back more stock, and invest more in growing and developing their reserves when the commodity price is high and these uses of capital are at their most expensive levels? Why do they lever up at the top of the cycle when there seems to be more downside than upside? These actions seem at odds with the rational concept of “buy low and sell high.” Can behavioral finance explain these seemingly irrational behaviors?For over half a century, business school students have been trained in the efficient market hypothesis which asserts that investors cannot “beat the market” because the stock market is so efficient that share prices reflect essentially all available information at all times. In their economics classes, these students have been taught how investors always make rational decisions that are in their best self-interest. Given the volatility in the oil and gas industry, many undoubtedly wonder how efficient the market is and how rational investors are. How do we explain the apparent market inefficiency and irrational behaviors?

Source: Behavioral finance in oil and gas – Oil & Gas Financial Journal

U.S. companies claim largest onshore oil discovery in 30 years –

Energy enterprises Repsol and Armstrong Energy say they made the largest U.S. onshore oil discovery in three decades in Alaska.The conventional hydrocarbon oil was found in the Horseshoe-1 and 1A wells initially drilled during the 2016 to 2017 winter campaign in the Nanushuk, an area located in Alaska’s North Slope.

Source: U.S. companies claim largest onshore oil discovery in 30 years –

EOG cuts losses to $190 million, doubles Permian oil estimates | Fuel Fix

EOG Resources cut losses in the third quarter, like many other E&P companies.  The oil exploration firm also said that it was doubling the amount of oil and gas it thought it could recover from the Permian Basin.

EOG reported a third quarter net loss of $190 million, or 35 cents per share, $3.9 billion better than its performance over the same period last year. In the third quarter of 2015, EOG posted a net loss of $4.1 billion, or $7.47 per share.  Revenues dipped by 2 percent to $2.2 billion over the third quarter last year. Expenses were decreased by more than $6 billion, to $2.3 billion.  The decrease in income last quarter came from the continuing fall in crude oil and natural gas prices despite “significant well productivity improvements and lease and well cost reductions.”

Source: EOG cuts losses to $190 million, doubles Permian oil estimates | Fuel Fix

​Merit Energy wraps up nearly $1 billion capital raise – Dallas Business Journal

Merit Energy Partners has completed a $938 million equity raise this month, according to regulatory filings from the Dallas oil and gas investor.The latest Form D filed by the firm on Oct. 7 showed $789.5 million in capital raised.

Source: Merit Energy wraps up nearly $1 billion capital raise – Dallas Business Journal

Apache’s New Massive Oil and Gas Discovery; 3 bil barrels oil & 75tcf nat gas

Apache Corp. says it has discovered the equivalent of at least two billion barrels of oil in a new west Texas field that has the promise to become one of the biggest energy finds of the past decade.The discovery, which Apache is calling “Alpine High,” is in an area near the Davis Mountains that had been overlooked by geologists and engineers, who believed it would be a poor fit for hydraulic fracturing. It could be worth $8 billion by conservative estimates, or even 10 times more, according to the company.Apache started acquiring mineral rights in the area two years ago and subsequently discovered its potential. The company then quietly went about locking up more land in the field, believed to be up to 450,000 acres overall. Its position now exceeds 300,000 acres, or roughly two-thirds of the field, and is about 20 times the size of Manhattan.The company has begun drilling in the area and says the early wells, which produce more natural gas than oil, are capable of providing at least a 30% profit margin at today’s prices, including all costs associated with drilling. Some are so prolific that they can break even at a price of 10 cents per million British thermal units, according to the company. Natural gas futures closed Tuesday at $2.72.“This is a giant onion that is going to take us years to unveil and peel back,” Apache Chief Executive John Christmann IV said in an interview. “The industry dogma about this area, all the fundamental premises that most people had about it, were just wrong.”

Source: Apache Has High Hopes for New Oil-Field Discovery in Texas – WSJ

EOG Resources Inc. to buy private energy company in $2.5 Bil deal – HBJ

Houston-based EOG Resources Inc. (NYSE: EOG) plans to gobble up a private energy company to expand its assets in the Permian and Powder River basins.EOG announced Sept. 6 it plans to buy Artesia, New Mexico-based Yates Petroleum Corp. and some of its subsidiaries and other entities in an approximately $2.5 billion deal. Yates is a privately held crude oil and natural gas company that boasts about 1.6 million net acres across the western U.S.

Source: EOG Resources Inc. to buy Yates Petroleum Corp. – Houston Business Journal

Drillers Dodge $10 Billion-A-Year Threat to Output in Colorado – Bloomberg

Oil and natural gas explorers including Anadarko Petroleum Corp. and Encana Corp. have escaped a vote in Colorado that would’ve limited drilling and threatened to halt about $10 billion worth of oil and natural gas production a year.A proposal known as Initiative No. 78, which would’ve restricted drilling near homes, fell about 21,000 valid signatures short of the total needed to qualify for a ballot vote, based on a projection in a statement from Colorado Secretary of State Wayne Williams. A measure allowing local governments to ban fracking also failed to attract enough signatures.The measures had threatened to wipe out oil and gas drilling in Colorado, the sixth-largest gas producer among U.S. states, according to a Bloomberg Intelligence analysis. Initiative No. 78 alone could’ve barred drilling across 90 percent of the state, where explorers extracted about $10 billion worth of oil and gas last year, the report showed.

Source: Drillers Dodge $10 Billion-A-Year Threat to Output in Colorado – Bloomberg

Halcon Resources Files for Bankruptcy

Halcon Resources Corp., the oil and gas explorer founded by wildcatter Floyd Wilson, filed for bankruptcy as part of a restructuring agreement reached with key lenders in May.

The agreement would eliminate $1.8 billion in debt and $222 million in preferred stock, the Houston-based company said at the time. On June 10, Halcon said a majority of holders had accepted the restructuring, which will be implemented through a Chapter 11 bankruptcy.

The filing Wednesday in Delaware federal bankruptcy court listed $3.12 billion in debt and $2.85 billion in assets.

‘Staggering’ U.S. E&P Reserve Revisions in 2015 Eliminated 40 Tcf, 4.1 Billion Bbl

The 50 largest U.S. producers last year saw their revenues and capital spending plunge, as they attempted to cope in the first full year since 2004 that West Texas Intermediate oil spot prices averaged under $60/bbl, Ernst & Young LLP said.

The firm’s annual U.S. oil and gas reserves study, issued Tuesday in Houston, found that exploration and production (E&P) companies overall reported total capital expenditures in 2015 of $117.5 billion, off 41% from $199.8 billion in 2014. A decline of that magnitude last occurred in 2009 during the global financial crisis. By comparison, spending totaled $166.7 billion in 2013, $180.1 billion in 2012 and $149.8 billion in 2011.

Combined gas and oil production increased 6% year/year, with natural gas output rising 2% to 13.6 Tcf and oil climbing 10% to 2.4 billion bbl. However, “staggering downward reserve revisions” removed 40 Tcf of natural gas and 4.1 billion bbl of oil. End-of-year gas reserves fell 21% to 147 Tcf, while oil reserves declined 12% to 24.1 billion bbl. Additionally, property impairments, including ceiling test charges, were recorded by 44 of the 50 E&Ps and totaled $141.8 billion.

“The significant spending cuts and downward reserve revisions reported in 2015 are illustrative of a structural shift taking place in the industry as a result of abundant oil,” said EY’s Herb Listen, assurance oil and gas leader in the United States. “No longer are capital investment decisions driven by the pursuit of growth; instead the industry and those investing in it are progressively more focused on cash flow and returns.”

The analysis, which represents results from 2011-2015 for the 50 largest publicly traded E&Ps, relied on 2015 year-end reserves estimates for integrateds (8% of the total), large independents (32%) and independents (58%). Based on total reserves at the end of 2015, integrateds held one-quarter (24%), as did independents (25%), with large independents holding about half (51%).


Encino Energy led by Hardy Murchison raises capital for energy acquisitions – Houston Business Journal

Houston-based Encino Energy LLC has raised almost all of an expected $33 million capital raise to fund acquisitions in shale basins around the U.S., according to filings with the Securities and Exchange Commission.

The energy sector has raised significant capital over the past couple of months despite low oil prices, including Post Oak Energy Partners, which just closed a $600 million fund, and a new wellhead company led by Kelly Joy, just raised $36 million in seed funding.

Source: Encino Energy led by Hardy Murchison raises capital for energy acquisitions – Houston Business Journal