I have no idea whether or not Games of Thrones has this title copyrighted. But, for the oil and gas world, there is no sweeter statement. The general consensus is that this winter will be, by far, the coldest we’ve had for a while. Our inventory is lower than it should be, and that will play a crucial role in the value of an MCF in the winter months. With that being said, you can’t give away a deal primarily made up of gas assets.
The major reason has nothing to do with winter, with gas volatility or with location. It has to do with current midstream contracts. Unless you (as an operator) have a significant amount of gas going through pipe, you have absolutely no leverage against the fee structure that midstream currently has in place. That fee structure eats the vast majority of available profits, and is causing a number of wells to be shut in entirely. Shut in wells don’t sell, because shut in well economics start in the red.
Savvy operators (usually ones with enough leverage with midstream companies through total production) are picking these gas properties up for next to (and sometimes less than) nothing. When gas jumps in price this winter, these gas wells will be well out of the red. So, thank goodness you can give away a gas deal right now, because buyers can have their pick of targeted wells.
These wells (at least for the most part) hold more acreage, hold deeper rights and are less money to operate than their oil counterparts. These are all very good boxes to check in 2017. And the best part is these deals are everywhere. They are easily negotiated and quick closes.
When you sit down with your team, remove the word “non-core” from the discussion. Everything is core if it’s in the black in 2017. Your team knows the area that is your company’s bread and butter. We (Beachwood) work with operators to identify their “targeted acquisition plan,” finding the geographic area that best suits their current acquisition needs. Within this area, you can find immediate acreage and production that is available today.
We can literally add more dollars to the bottom line with one phone call. It’s just knowing where to look. Find your target area, know your focus, and add more money to your company!
Happy Hunting and Enjoy this Winter!