• 4 minutes Will We Ever See 100$+ OIL?
  • 8 minutes Iran downs US drone. No military response . . Just Destroy their economy. Can Senator Kerry be tried for aiding enemy ?
  • 11 minutes Energy Outlook for Renewables. Pie in the sky or real?
  • 1 hour Iran Loses $130,000,000 Oil Revenue Every Day They Continue Their Games . . . .Opportunity Lost . . . Will Never Get It Back. . . . . LOL .
  • 20 mins Renewables provided only about 4% of total global energy needs in 2018
  • 3 hours Berkeley becomes first U.S. city to ban natural gas in new homes
  • 2 days Iran Captures British Tanker sailing through Straits of Hormuz
  • 1 day EIA Reports Are Fraudulent : EIA Is Conspiring With Trump To Keep Oil Prices Low
  • 13 hours Shale Oil will it self destruct?
  • 1 hour Today in Energy
  • 3 days Drone For Drone = War: What is next in the U.S. - Iran the Gulf Episode
  • 2 days Oil Rises After Iran Says It Seized Foreign Tanker In Gulf
  • 9 hours So You Think We’re Reducing Fossil Fuel? — Think Again
  • 3 hours N.Y. Governor Signs Climate Bill
  • 2 hours First limpet mines . . . . now fly a drone at low altitude directly at U.S. Navy ship. Think Iran wanted it taken out ? Maybe ? YES
  • 3 days LA Solar Power/Storage Contract
  • 19 hours U.S. Administration Moves To End Asylum Protections For Central Americans
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

A Rising Star In U.S. Shale?

They say that success is easy: All one needs to do is find something that works, and then do it – over and over again.

Early last year, I recommended Silver Run Acquisitions, a special purpose acquisition company (SPAC) put together by EOG Resources ex-CEO Mark Papa, one of the ‘movie stars’ of shale oil production here in the United States. I liked Mark Papa’s approach to building EOG, and the unbelievable success that his company has had in finding, accessing and managing some of the best acreage in the Eagle Ford and Permian basins. He was on the top of everyone’s list for smart and successful shale CEO’s. More than that, since leaving EOG, Papa had had several interviews that proved to me he was not just a mindless cheerleader for shale like some other ‘star’ CEO’s. He spoke about many of the difficulties in shale development going forward and foresaw the glut and oil’s price decline.

There were further incentives to latching on to Silver Run early in its life: The structure of the SPAC vehicle, with its ‘blank check’ flexibility and zero debt, positioned them perfectly to take advantage of the coming bust and deleveraging of assets that was part of shale reorganization in 2016. Papa used these advantages, ultimately throwing his entire bankroll at Centennial Resources (CDEV), a leveraged player in the hot Permian, becoming the CEO of that company in the process. For both entities, it was a great match: Centennial got cash to help deleverage and a premier CEO while Silver Run got great assets at a discounted price. The investment so far has delivered nearly a 90 percent return.

Now, along comes the second act: Silver Run Acquisitions II (SRUNU) – a second $1.035 billion SPAC pushed forward by Riverstone Holdings, using the same exact model as Silver Run I.

This time, a different but nearly equivalent ‘star’ to Papa has emerged to run this new SPAC – Jim Hackett, the ex-CEO of Anadarko and COO of Devon Energy. Of course, the question is: Can the second act of this show be anywhere as good as the first?

My answer is that it could. But there are differences to note.

On the negative side, the environment for acquiring shale assets is not quite as desperate as when Papa was shopping around in 2016 – although there are still massive consolidations occurring with shale players, the comps for acreage now, as oil is hovering near to $50, are much pricier. Secondly, the reorganization that many large caps have been engaged in is in its third year – many of the bargains may already have been bought.

But there are positives for Hackett, as well. Most importantly, he has strong connections to two of the biggest U.S. independents – Anadarko and Devon – and BOTH of these big companies have been in a very strong, and as yet incomplete, push to shed assets and debt. As these consolidations proceed, is there a solid chance that the ex-CEO and COO of both companies might get a first look at some of these sale acreage prices before they go to the general market? I’d say there is. Even if his acquisitions don’t come from these two, Hackett knows virtually everyone in the shale space.

Shares for Silver Run II IPO’ed at $10 per unit, exactly as Silver Run I did more than a year ago. Today, they are trading above $10.45 and will cost a very reasonable 5 percent premium to get in.

I think that’s a worthy punt on a blank check SPAC that’s not reinventing the wheel, but merely trying to repeat the success of their sister offering.

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