5 Minutes by,,,,,,,, Read Reuters, NEW YORK, July 1 – Oil companies are betting that if they sell land, buyers will come, as crude prices have increased by more than 50% this year, resulting in the most active deal pipeline in more than four years. Large oil companies are unloading properties from Texas to California, with some taking advantage of the market rally to raise money for future investments in the global transition to cleaner energy. According to interviews with ten advisers and analysts, other sellers are seizing the opportunity to profit when large properties were being sold at a loss just a few months ago. Despite the fact that the use of renewable fuels is increasing, global oil demand is expected to return to pre-pandemic levels next year, providing opportunities for producers looking for bargains. “Last year, fear was the deciding element in the greed versus fear debate. Greed is starting to sneak in “Pickering Energy Partners’ chief investment officer, Dan Pickering, stated. “There is more optimism in the market, a little more greed on the part of the sellers, and a little more urgency on the part of the buyers.” Even so, certain buyers may have difficulty obtaining finance. Under investor pressure over climate change, some private equity firms that once dominated oil transactions have stepped back, while European banks have largely stopped lending to oil companies. Pickering believes that smaller deals or land with more shale, which is seen as less polluting than tar sands oil, may be easier to finance. The majors, such as Royal Dutch Shell, BP, and Chevron, are among the top sellers. Big companies, such as Norway’s state-run Equinor, were having trouble finding buyers early this year, as the business had to sell its Bakken shale stake for $900 million, roughly one-fifth of what it paid a decade ago. Companies now see a brighter future for possible sales. Chevron said on Wednesday that it intends to sell a swath of conventional assets in the Permian Basin, valued at over $1 billion, as originally reported by Reuters. While some sellers are driven by the desire to profit from the sale of underperforming assets, others, such as Shell, are selling in order to reduce carbon emissions in response to investor and government pressure. The largest shale formation in the United States, the Permian Basin of Texas and New Mexico, is where the possible transactions are concentrated. In addition to Chevron’s planned Permian sale, Shell is considering selling all of its Permian Basin acreage, while joint venture partner Exxon Mobil has informed Shell that it will cease production in California. Smaller transactions have emerged as private equity firms seek to sell long-held interests and failing companies attempt to sell off undesired assets. According to one person involved with the talks, three companies offering Permian asset sales have established their ideal deal prices based on oil climbing to $100 a barrel. Global benchmark Brent futures are expected to hit $100 per barrel in 2022, according to Bank of America, with U.S. crude trading at $95 per barrel. This is higher than a Reuters poll of 44 analysts released on Wednesday, which predicted an average price of $64.54 this year and $65.44 next year. “While asset prices are rising, which is helping sellers, there is still plenty of upside for purchasers at these commodity price levels,” said Andrew Dittmar, a senior M&A analyst at energy information company Enverus. “Buyers are paying asset valuations that allow for a slight drop in commodity prices while still making money.” Smaller, privately held businesses perceive an opportunity to profit from the current high costs. Mesquite is trying to sell Eagle Ford acreage as it explores selling off even more assets as it exits from bankruptcy, while private driller Recoil Resources is looking for a buyer. Skye Callantine’s Validus, which is said to be among active bidders on properties in the Eagle Ford, could be a potential buyer for smaller packages. Jessica Resnick-Ault in New York, Arathy Nair and Shariq Khan in Bengaluru, and Swati Verma in Bengaluru contributed to this story. Jessica Resnick-Ault wrote the piece, while David Gaffen and Lisa Shumaker edited it./n
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