NrgEdge Editor

Sharing content and articles for users
Last Updated: March 21, 2016
1 view
Business Trends

You’ve probably heard the saying “buy low and sell high” or some version of it. Oil prices have been painfully low, so does that mean it’s time to buy physical oil assets?

The shale boom in North America over the past 10 years has brought many potential buyers through our office looking forConsulting support. The allure of high returns, large drilling inventories and capital flexibility can be tempting. Many buyers who struggled to stomach the valuations of the assets when oil prices were high are now revisiting the space thinking there may now be a number of great deals to be had. That’s where we start exerting a bit of caution with our clients as there is no magic formula or time – given a bit of hindsight, the landscape is littered with “bad deals”.

Most people thought last year was going to be the year of opportunity in the deal market, but operators proved resilient and lenders demonstrated patience and flexibility. Fast forward and more than a year of low prices is putting some operators in sticky situations. The best deals (for the best assets) make sense at almost any oil price, but there’s no doubt it’s better to buy when the sellers have to sell.

We believe a buyer’s market will emerge if low oil prices persist (there are likely great deals happening now and we’ll see them announced over the next few months). But generally speaking, the sellers who are forced to divest assets do not have much exposure to the best acreage, and those who do will part with their best assets only as a last resort. Outside of relatively small “bolt-on” asset deals, we expect corporate M&A to be the preferred entry vehicle for companies entering core areas.

Companies come to us after they’ve started the process and we generally help them get better organized and more focused in their search. Most haven’t considered all the consequences. They want an asset that meets all or most of the following criteria:

  • Financially stressed
  • Top-tier acreage
  • Low-risk future development
  • Exploration upside
  • Cash-flow positive
  • Good price or valuation

In short, they’re looking for a unicorn – that is, an asset someone else has discovered or purchased before really knowing what they had. For the most part, companies don’t sell these assets. They’re the crown jewels.

And although you can’t buy another company’s crown jewels on the cheap, investing in upstream properties can still be a good option.

These days – with the amount of liquidity looking for deals and a wealth of publicly available data to analyse performance – it would be hard to buy something that is materially undervalued by the rest of the market. Well, unless you’re willing to take exploration risk.

Executing the transaction isn’t the first step. We start by asking a few basic questions:

  • Financial commitment: This is the “what’s-your-budget” question in home-buying terms. It also involves more than the upfront acquisition cost. If you want the asset to grow, it’s going to take significant reinvestment over a long period of time (you’ll be on the capex treadmill for awhile).
  • Materiality: Is your budget big enough to make a difference? It sounds fun, but it could just distract you from your core business, whether it’s focused in another region or in a complementary business (trucking, refining, chemicals etc.).
  • Risk tolerance: Are you willing to buy in an up-and-coming neighborhood? Exploration success rates may be low, but the payout could be big. Are you willing to risk hundreds of millions with a baseball-batting average chance for success or do you need barrels today (hint: producing barrels are more expensive)? Another reason unconventional drilling is favored is the failure rate is low. You might lose money, but dry holes or absolute failures aren’t common.
  • Timing: Do you have to buy something being marketed today or do you have time to build relationships with potential sellers? Note, the best deals typically aren’t publicly marketed, whether it’s needing to raise cash or it’s a seller that doesn’t want the deal hitting the public domain. You want to be the buyer when the deals are negotiated quietly.

Even if a company can get internal agreement on these issues above, the most important element is its capability. Does it have internal strengths and infrastructure that will help it execute or does it need to acquire the talent through a corporate acquisition?

That’s just the beginning of the process. The answer to our original question isn’t as simple as most people hope but, in our view, it is much more important to identify the right deal as opposed to a good deal. Check the weather before you fly, the timing might be right or you might be flying into a storm.

1 0

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

Funko Action Figures: Collectible Figurines

Funko Action Figuresare a popular collectible toy that is now being incorporated into the workplace to motivate employees. The action figures have been used as an alternative to the traditional desk calendar or as a prize for top performers. With this type of incentive, employers can expect their employees to feel more motivated and productive.

Many employers have found that Funko Action Figures are a great way to motivate their employees and provide incentives for high performance at work. Funko Action Figures are a popular collectible toy that is now incorporated into the workplace. These small collectibles are given to employees to motivate them. Funko figures were once only available at comic book stores, but now they are being used in offices for this purpose.

The company is called Zappos and they first introduced this idea back in 2009. They gave these figurines to their employees as a way of motivating and rewarding them for their hard work and dedication. Although it’s not very clear why the action figures themselves motivate people, we can see that it has been working well for Zappos as they have continued to use it since 2009. These soft-bodied vinyl figures, often called "Pop!" Figures were originally conceived by Mike Becker and founded by Alan Becker.

The Funko Pop! Action Figure is a line of collectible toys produced by the company Funko LLC. They are typically stylized vinyl figures depicting characters from various media and entertainment. First introduced to the public in 2005, the company was originally founded as a bobblehead company in 1998 and became popular through distribution at chain retailers such as Walmart and Target. The first wave of Funko Pops was based on Disney properties like Mickey Mouse as well as other popular culture icons such as Conan O’Brien and Catwoman.

Funko Action Figures are collectible figurines that often depict pop culture characters. They are often used in the office to motivate employees and provide a sense of community. Funko has established itself as a major player in the toy industry with its trademarked Pop! vinyl figures. This company is taking on new ventures like collecting by introducing Funko Action Figures, for example, Boba Fett from the Star Wars movies. This type of product is sometimes called a 'blind box' because you don't know which figure you're getting until you open it. The Boston-based company, BuzzFeed, has introduced this type of toy into their office to help with team building and morale. The employees at this company seem to have a lot of fun with them.

May, 25 2022
Asset Works - Fleet Management Software

Asset Works FleetFocus fleet management software is a powerful solution designed to help asset- and infrastructure-intensive organizations control costs and streamline operations. By tracking vehicle location and maintenance history, fleet managers can extend the useful life of their fleet and prevent costly downtime. With preventive maintenance scheduling, work order and labor tracking, and parts and inventory tracking, FleetFocus helps fleet managers maximize efficiency while minimizing expenses. As a result, Asset Works fleet management solutions deliver industry-leading value for fleet managers around the world.

Support: [email protected]

May, 24 2022
Where to buy your Gun Parts from?

It is important to know where to gun parts from. There are many places you can buy them from, but it is important to choose the right place so that you get the best quality and service. There are many places where you can buy gun parts from. You can buy them from gun stores, online retailers, and even at a flea market.

One of the best places to buy gun parts from is Always Armed.They have a wide range of products available, they offer great customer service, and they have convenient shipping options.

Buying gun parts can be a difficult task. There are many different types of firearms and there is a huge variety of gun parts. The right place to buy gun parts depends on what you are looking for and what kind of firearm you have.

If you are looking for a specific part, then your best bet is to search online. You can find the part that you need at an affordable price and it will be delivered right to your door. If you want to save time, then this is the best option for you. If not, then your local gun store might be the best option for you because they have many different types of firearms as well as all kinds of other equipment that might come in handy for hunting or shooting sports.

When it comes to buying gun parts, you need to be very careful. There are a lot of scams out there and some companies just want to take your money and never send you the goods. 

May, 20 2022