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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Will This Be The Biggest Oil Bid Round This Decade?

Offshore platform

Big spending is back in the oil and gas world. With ExxonMobil unloading a $6.6 billion mega-buy in the Permian Basin of Texas this week — just a day after Noble Energy unveiled a $2.7 billion acreage purchase in the same play.

In fact, new data from Evaluate Energy shows that petro-M&A hit a high in Q4 2016. With oil and gas buyouts totalling just under $60 billion during the quarter — by far the highest since Q2 2015, a quarter that was skewed by Shell’s $50 billion acquisition of BG Group. Check out the chart below.

(Click to enlarge)

Oil and gas M&A saw a notable jump during Q4 2016

And news this week suggests oil companies may have another big target for project acquisitions over the coming months.

In Brazil’s prolific subsalt play.

Brazil’s Oil Secretary Marcio Felix told Reuters that the country will launch not one, but two subsalt bid rounds in 2017. With the first coming within the first half of the year.

Felix said that this initial bid round will focus on areas adjacent to existing discoveries — in effect representing a “brownfields” slate of projects.

A second round planned for November is likely to be even higher-impact. Planned to feature new exploration areas, which could yield billion-barrel discoveries of the kind made in several parts of the subsalt.

These will be Brazil’s first subsalt auctions since 2013. With prices for offshore drilling rigs having fallen substantially since the last bid round took place — potentially improving discovery metrics for fields here.

Even more critically — for the first time, foreign firms will be allowed to acquire 100% ownership in subsalt fields. After Brazil’s lawmakers last year scrapped rules requiring state-owned Petrobras to hold a stake in every project within this play.

All of which should make for some interesting bidding. Names like Shell, Total and Statoil are already being tossed around — watch to see who turns up in this key producing region.

Here’s to a sub-stantial opportunity.

By Dave Forest

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