With oil price recovery taking hold, several US oil and gas companies entered 2018 with a compelling plan - sell undeveloped or less essential fields and invest the money to boost returns from their sweetest, most productive spots.
There is a catch, though. The strategy assumes that with crude now up more than 150 percent from its February 2016 bottom enough firms are keen to crank up production, even if it means buying fields with higher extraction costs and lower margins.
So far, sale attempts suggest those buyers may be hard to come by. After a bruising downturn, shareholders are looking to get a cut of improved profits and asset sale proceeds rather than underwrite acquisitions, those involved in these deals say.
“Oil and gas companies are no longer rewarded for simply 'grabbing land' and public investors have become more discerning regarding acquisitions,” notes Jon Marinelli, head of US energy investment and corporate banking at BMO Capital Markets.
Shares of Devon Energy Corp, QEP Resources Inc and Southwestern Energy Co and others have rallied after they floated plans to sell non-core acreage, reflecting hopes that some of the proceeds will return to investors.