I've been looking at potential acquisitions of oil projects this week. And there are something interesting patterns emerging across the sector.
Investors in the space today want one thing: America. With buyers seeking exposure to "hot" unconventional plays like the Bakken, Marcellus and Eagle Ford.
But all that attention is driving up prices. Meaning that getting into this room is becoming ever-more expensive--raising the bar for performance needed to generate acceptable returns on drilling dollars.
Amid that environment, it's interesting to see what's happening in other parts of the world. With news yesterday suggesting that international oil assets could be getting very cheap.
That's the message coming from U.S. major Murphy Oil. A firm that Reuters reports is looking to sell a chunk of its interest in Southeast Asian production properties.
Sources suggested that Murphy is near to offloading up to 30% in its fields in Malaysia. With Japanese trading house Mitsubishi reportedly leading the bidding.
The move is a notable departure for Murphy. Given that Malaysia has long been a core operating area for the company--last year producing 40% of the firm's total output. But with Murphy now looking toward operations in big plays like the Eagle Ford, it appears the company is moving on.
This of course spells opportunity for buyers like Mitsubishi (India's ONGC and Oil India have also been named as potential bidders for Murphy's Asian assets). The key question being: what's the sale price?
We'll see what details emerge on that front. But given how eager big firms have been to refocus capital on the U.S., it's possible that Murphy could be a very motivated seller.
If that does turn out to be the case, it signals a big opportunity unfolding in unloved international oil assets. We've recently seen a similar pattern of divestures in producing regions like the North Sea, Gulf of Mexico and even West Africa. With many of these assets going at very attractive valuations.
Keep an eye on these sales. The buyers may turn out to be some of the most profitable companies across the sector as they develop these fields over the coming months and years.
Here's to underpriced oil,
By Dave Forest