An all-stock acquisition in the Permian basin this week has made headlines for the two companies involved—Callon Petroleum and Carrizo Oil & Gas—but the implied value of the deal is multiple times lower than it would have been five years ago during the first wave of the U.S. shale boom.
Pressured by meager returns, if at all, and lower—if any—returns to shareholders, smaller U.S. shale players are looking for economies of scale and acreage positions close to their current ‘sweet-spot’ operations.
Yet, the mergers and acquisitions (M&A) scene across the U.S. shale patch hasn’t been thriving this year, except for a one-time huge deal between large-cap companies, the Occidental/Anadarko tie-up, the likes of which occur once in half a decade.
Even with the current low deal multiples and low valuations, smaller companies aren’t rushing to close deals.
Those on the hunt for deals are carefully looking for quality over quantity and are not buying acreage that doesn’t materially improve the quality of their shale assets portfolio, Ryan Luther, a senior analyst with RS Energy, told Forbes contributor Christopher Helman. The analyst was commenting on the M&As in the U.S. shale patch and on this week’s announcement that Callon Petroleum and Carrizo Oil & Gas approved a definitive agreement under which Callon would buy Carrizo in an all-stock transaction valued at US$3.2…