• 3 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 7 minutes Saudi and UAE pressure to get US support for Oil quotas is reportedly on..
  • 11 minutes China devalues currency to lower prices to address new tariffs. But doesn't help. Here is why. . . .
  • 15 minutes What is your current outlook as a day trader for WTI
  • 3 hours Domino Effect: Rashida Tlaib Rejects Israel's Offer For 'Humanitarian' Visit To West Bank
  • 14 hours Will Uncle Sam Step Up and Cut Production
  • 2 days Movie Script: Epstein Guards Suspected Of Falsifying Logs
  • 20 hours In The Bright Of New Administration Rules: Immigrants as Economic Contributors
  • 16 hours Trump vs. Xi Trade Battle, Running Commentary from Conservative Tree House
  • 3 hours Continental Resource's Hamm (Trump Buddy) wants shale to cut production.Can't compete with peers. Stock will drop in half again.
  • 3 hours Gretta Thunbergs zero carbon voyage carbon foot print of carbon fibre manufacture
  • 1 day Significant: Boeing Delays Delivery Of Ultra-Long-Range Version Of 777X
  • 12 hours NATGAS, LNG, Technology, benefits etc , cleaner global energy fuel
  • 2 days I think I might be wrong about a 2020 shakeout
  • 2 days Kremlin Says WTO's Existence Would Be In Doubt If the U.S., Others Left
  • 52 days To be(lieve) or Not To be(lieve): U.S. Treasury Secretary Says U.S.-China Trade Deal Is 90% Done
  • 2 days Why Oil is Falling (including conspiracy theories and other fun stuff)
Dan Dicker

Dan Dicker

Dan Dicker is a 25 year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline and heating oil…

More Info

Who To Back When Oil Rebounds

In my book Shale Boom, Shale Bust, I isolated three places one could reasonably invest for the long term to bet on the (I believe) inevitable boom cycle in oil that will reemerge in 2017. The first, the E+P ‘survivors’ of the long cheap oil ‘winter’, I’ve talked about almost exclusively and at length. The second, infrastructure and services, hasn’t yet fully revalued for the huge production shifts and decreases to come – and therefore remains an investment for the future.

Finally, there are the ‘vultures’ – Those cash-rich companies and private equity groups that can pick off the assets of the distressed, debt-laden producers being forced to delever. In my book, I mentioned two likely candidates for this: Exxon-Mobil (XOM), a possible buyer of a big shale player and Blackstone (BX), one of several PE firms who have established big independent funds that will concentrate on distressed energy assets.

But what if a true oil ‘landsman’ - who had already built a great shale company - wanted to reemerge at this moment in the bust cycle to build another company from scratch? This is precisely what Mark Papa, the ex-CEO of EOG Resources (EOG), is intending to do with his SPAC: Silver Run Acquisitions (SRAQU). I believe it represents a great long-term opportunity.

Recently, I was deeply considering the idea of a managing a focused energy fund. What an incredible advantage, I thought, to be able to start a fund today at zero by buying stocks and bonds when they are at their most distressed point. I ultimately decided not to take on this challenge, but the position Mark Papa is in today is precisely the same. Silver Run has amassed $450m (an over subscription of $50m) to allow Papa to go wherever he wants and pick out his choice of depressed shale assets with which to build his new company.

His is hardly the first focused vehicle to attempt this. The tragically departed Aubrey McClendon floated a $1B SPAC in early 2015 to buy shale assets for American Energy Partners – but that attempt ended in failure as McClendon only managed to raise $11m of the planned $1B in units. That Mark Papa has, in contrast, oversubscribed so easily for his nearly half a billion fund says a lot for the confidence the market has in him – and my confidence in him as well.

It’s not as if the market is awash in superb shale assets selling at bargain basement prices right now, nor is there zero competition for the best acreage that is available. As I mentioned, Blackstone is one of more than half a dozen PE firms to have set up dedicated funds for energy assets, and all of them are hungrily waiting for distressed companies to start to offer out some of their better stuff. But I believe that Mark Papa has an advantage over many of them, not only because of his land knowledge – acquired while he was at EOG – but because of his personal relationship with the other ‘landsmen’ at the other companies.

They know Mark Papa – and trust him. They’ll likely be more inclined to talk to him first about whatever assets they are thinking of putting on the block.

For these reasons, I’ve begun to buy units of Silver Run. Right now, they’re trading for a 3-4 percent premium over their initial offer price, which I consider a reasonable premium to pay – for the expertise of a true shale ‘guru’ getting back into the game.




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play