It’s a new year, and the oil and gas market is hungry for assets. There are companies all over the map looking for good quality assets, but the transactions are not happening. We have noticed a considerable amount of deal flow in the past few months, as seller’s have seen this period as a market shift in their favor. So, with a number of deals available, willing sellers, and active buyers, why are there not more transactions?
Beachwood has seen a number of transactions in 2017, and it’s because we’ve seen companies that are looking to sell follow a few crucial steps.
#1 Don’t put your deal to auction
If you are a buyer in this market, you are running the exact same economic model as every other company in the auction. So, if you are a seller, you can expect 30 or so bids on your assets that are only a few dollars from one another. More than likely it is based on PV10 (or close) and offers no value on the upside you see for your asset. This should be a last resort for operators and owners that are looking to get PV10 on assets with positive cash flow, and slightly higher than zero for assets in the red.
#2 Make sure you give data
Companies that are looking to buy your assets want to know what you know. If you know that production is down because of a land issue or a new pumper, that information is very valuable to a buyer. Big data is everywhere. Most of your production, decline curves, reservoir information and estimated expenses are available or easily accessible. The upside storyline of each asset is what will bring additional value to your sell price. Buyers want to know as much information as possible. Don’t view this as a waste of time, understand that this data will (in many cases) increase the chances of closing quickly.
#3 Know the market value
With that being said, you as a seller need to know the market value. We all want to live in 2013. It was fun. But the reality is that asset is worth half of what it was in 2013, and the decline curve has continued to move 5 years down the line. Knowing the estimated value of your assets gives you great leverage toward a quick close.
As I say in every article I publish, every deal is different. Our strategy is generalized and can be used as discussion points for your A&D team, or your contract divestiture organization. The team at Beachwood is always available to discuss your company specific questions, just give us a call: (405) 463-3214.
Josh Robbins is currently the Chief Executive Officer of Beachwood Marketing. He has consulted and provided solutions for several industries, however, the majority of his consulting solutions have been in manufacturing, energy and oil and gas. Mr. Robbins has over 15 years of excellent project leadership in business development and is experienced in all aspects of oil and gas acquisitions and divestitures. He has extensive business relationships with a demonstrated ability to conduct executive level negotiations. He has developed sustainable solutions, successfully marketing oil and natural gas properties cost-effectively and efficiently. Beachwood strives to partner with top tier oil and gas firms to find off-market deals that provide maximum benefit to their corporate acquisition strategy. At Beachwood, Mr. Robbins manages the corporate branding, senior staff, and the Beachwood Strategic Consulting Group, including sales strategy development for all of the Beachwood clients. Josh has been featured in numerous trade magazines as he is an accomplished writer and speaker on the acquisition and divestment market. He writes a bi-monthly acquisition and divestiture column for Oilman Magazine that has a social reach of an estimated 145,200 views per issue. The best way to reach Mr. Robbins is through email.
Oil and gas operations are commonly found in remote locations far from company headquarters. Now, it's possible to monitor pump operations, collate and analyze seismic data, and track employees around the world from almost anywhere. Whether employees are in the office or in the field, the internet and related applications enable a greater multidirectional flow of information – and control – than ever before.