Brian Alfaro Discusses the Strong M&A Interest in Permian Basin
SAN ANTONIO, TX / ACCESSWIRE / May 2, 2018 / Oil and gas (O&G) industry merger and acquisition (M&A) activities slowed for most of 2017, largely due to drillers focusing on consolidating their positions in a few core areas to contend with low oil prices by purchasing assets that allowed to connect pieces of land, drill more efficiently and improve cash flow. However, the money is starting to return this year with large energy companies playing a major role in deal making. Energy industry expert Brian Alfaro explains the renewed interest in M&A deals in the O&G industry, with the Permian Basin being the lead target.
Low oil prices in 2017 were partly dictated by the oversupply of oil and big, transformational deals made by producers back in 2016. That year, drillers swarmed the Permian Basin where the cost of producing oil was low, but the overwhelming amount of deals – over $40 billion worth made in the last 12 mounts leading to the first quarter of 2017 – pushed the prices of land, and companies that owned it, to unseen heights. A change of priorities was another major factor for slower 2017, as explained by Kraig Grahmann, head of the energy finance group at Haynes and Boone, an international corporate law firm. "Investors wanted Permian players to focus their capital on drilling up the underdeveloped acreages instead of acquiring more of them, especially at a higher price." While oil prices are nowhere near the old peaks, they are expected to stay on the high end of $50-60 per barrel range this year. As noted by Brian Alfaro, the price stability, which is no less important to deal-making than high oil price, is enough to make room for strategic acquisitions within the Permian Basin this year.
In the first quarter of 2018 a number of large deals have already signified the renewal in M&A interest, which is expected to increase during the second and third quarters. In January, a joint venture of Goldman Sachs and Riverstone Holdings, leading global investment banking and private equity firms, purchased a part of Lucid Energy Group's natural gas processing and pipeline infrastructure in the Permian Basin for $1.6 billion. In the same month, NGP, an energy investing company, announced the investing of $820 million in Luxe Energy, Austin-based O&G organization, which is considered one of the biggest oil patch investments for a startup. Earlier in December, a deal of roughly the same size – $780 million – was stuck with another Austin-based O&G development focused enterprise, ATX Energy Partners. With the oil prices becoming firmer and organizations concentrating on reducing operating costs by drilling vertically and establishing domination over certain areas, the industry players look to increase capital spending in 2018, yet follow a more cautious strategy. "Companies have been increasingly focused on studying a core and focusing on that core. An enterprise that has a strong position in a basin will try to acquire a company that is nearby and has a similarly strong position." Says Grahmann.
Energy industry expert and O&G industry entrepreneur Brian Alfaro is the president and CEO of Silver Star Resources, an energy and petroleum company based in Texas. With nearly 20 years of experience in unconventional horizontal and conventional drilling behind his belt, and the assistance of a knowledgeable team of geologists, Brian's drills have produced close to 850,000 barrels of oil to date. Alfaro is also an avid supporter of both national and global charity organizations including the Miracle League, the National Multiple Sclerosis Society, First Book San Antonio, Special Olympics and Family Violence Prevention Services.
Brian Alfaro - Oil and Gas Industry Mogul and Dedicated Philanthropist: http://brianalfaronews.com
Brian Alfaro - On the Positive Investment Outlook for Permian Basin: https://finance.yahoo.com/news/brian-alfaro-positive-investment-outlook-025200987.html
Brian Alfaro (@alfaro_brian) - Twitter: https://twitter.com/alfaro_brian
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SOURCE: Brian Alfaro
