HomeBUSINESSMarket for U.S. oil acreage booms along with crude price recovery

Market for U.S. oil acreage booms along with crude price recovery

A recovery in the price of oil to more than two-year highs is offering a long-awaited opening to companies and private equity firms to shed unloved assets in the U.S. oil patch.

Sales of land parcels worth $6.9 billion have been announced in the first five months of 2021, almost eclipsing the $7 billion recorded in all of 2020, according to data vendor Enverus. Last year was the worst for U.S. acreage sales since at least 2006, after energy prices plunged due to coronavirus-related demand destruction.
More deals are on the way. Land worth more than $12 billion is either up for sale or being prepared to come to market in the United States, according to more than a dozen investment bankers and industry sources interviewed by Reuters.
A 43% rise in U.S. crude prices this year to their highest since October 2018 has made unloved acreage desirable enough for a small group of buyout firms, as well as some publicly listed energy companies with money to spend.

Those seeking to sell are oil and gas exploration and production companies seeking to pay down debt and redeploy capital for new drilling, and buyout firms that are often nursing losses on bets that went sour.
The sale of these properties could lead to their development, often following years of underinvestment, boosting U.S. energy production to meet growing demand, as the world economy recovers from the COVID-19 pandemic.

In one such example, Occidental Petroleum Corp (OXY.N) is marketing 25,000 net acres (101 square kilometers) in the Delaware portion of the Permian Basin, likely fetching upwards of $550 million, two sources said. The company has targeted raising more than $2 billion from divestments in the first half of 2021.

Laredo Petroleum Inc (LPI.N) agreed last month to sell a 37.5% stake in the hydrocarbons extracted from land in two Texas counties to alternative capital provider Sixth Street Partners. It plans to redeploy the proceeds to partly fund the $715 million acquisition of private equity-backed producer Sabalo Energy, whose adjacent acreage will give it scale in drilling.

“The market is robust, especially when compared with this time a year ago. We are putting some money to work, but we are also seeing opportunities to exit, ” said Jason DeLorenzo, managing partner at buyout firm EnCap Investments.
The Permian and North Dakota’s Bakken have seen strong deal activity in 2021 as buyers focus on shale basins with the cheapest production costs. EnCap-backed Grayson Mill Energy bought the Bakken shale assets of Equinor (EQNR.OL) earlier this year for $900 million.

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