In 2016 there have been many challenges for companies looking at acquiring oil and gas assets. Extremely low prices in February followed by a rebound in the second quarter led to delayed deals, reevaluations and additional bankruptcies. Although the stability of the market is still in question, some companies are maintaining their focus and drive and continue to acquire. They are successful in a market that very few are closing in.
In this article, we outline a way that you can tap into these highly successful companies’ A&D strategies and begin to close the deals you want.
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.
I was invited to be a guest speaker at a non-profit organization in our industry about the current state of the A&D market. It wasn’t long before the Q&A started, and a consistent theme emerged: “Where can I purchase assets?” The scraps available for purchase are slim — both in physical number and in economic feasibility.
One of the teams in attendance had a very inexpensive opportunity and wanted to know my opinion on the acquisition. “It doesn’t matter what the deal price is,” I said. “What matters is your availability to capitalize on your market share, both pre-deal and post deal.”
Companies that are able to close in this market; truly successful organizations, are asking how.
“How” is a far more important than “where.” With that being said, this is the market, so tomorrow we may enter into a different time, and “where” becomes the most important question! But for this market — today — “how” is the question: How can you build the assets to perform at a highly profitable level with potential $35 oil and sub $2 gas? How can you create seamless operations, and how can this asset fit within your current operational structure? Ask a 25-year veteran of this industry how much money a free oil well outside of his/her immediate control actually costs. There is a reason some assets are just given away.
As prices continue to rebound and economic models look better, the available deals will increase. Sellers are going to bring much more data to the table than in the past, as buyers are only attributing value to what they can see. You can expect more transactional activity in the next few months, but in order for your organization to capitalize, you have to focus on your company’s market share.
In the “Bear Strategies” article, we defined market share, as it pertains to oil and gas firms. “By using the four pillars: current area of operation, potential growth areas, types of assets and economic validity, you will be able to define your company’s core market. Within that market, identify all other companies that exist within the parameters defined above to create a competitive listing. Depending on the pillar deemed more important (area, growth potential, type, or validity) the competitive listing can be broken into market share.”
More deals are going to be available, but deals may not exist within your company’s market. Capitalizing within your market will not only consistently increase your operational and net revenues, but it will, in and of itself, expand your market, opening new doors to deals that were once considered outside your company’s area of operation.
Companies that build this market share database are the companies at the closing table. They are actively acquiring assets that fit within their market, and are doing it consistently. Take the time to build your company’s acquisition database, or contact a company that can build one for you.
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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.