Irrelevant
Well-known member
What's your take on AK buying some of them up?
Department of Interior approves ANWR O&G leasing plan
- Thread starter SAJ-99
- Start date
D
Deleted member 18333
Guest
Similar thing happened in the western coal market from 2008 - 2016. The leases companies where picking up where not great and honestly not needed. But after every successful bid, they saw a bump in share price. Regardless of quality of the lease. Seems growth, whether beneficial or not, was rewarded by the shareholders. This is a significant contributing factor to the slew of bankruptcies in coal companies in the last 5 years.
Similar rewards in O&G?
AvidIndoorsman
Well-known member
- Joined
- Dec 9, 2015
- Messages
- 18,249
I assume the state doesn't drill, fed leases have really long terms, so I'm assuming the idea is buy them cheap and possible flip them in a few years if Oil prices recover, which is a possibility.
Still I don't know if you are going to see banks backing North Slope development again.
Irrelevant
Well-known member
Could AK act as the bank?
AvidIndoorsman
Well-known member
- Joined
- Dec 9, 2015
- Messages
- 18,249
Like make a loan? Not sure, doubt they would. They could invest some of the trust in a operator, or back an operating team and essentially make their own company.
This is more likely:
States already invest in O&G in various ways, for instance a state employee pension fund might make an investment in a Private Equity company like Quantum or Warburg Pincus which then backs an OG company. On the books it shows as shares of Warburg, which are held in fund 54, this hides your OG exposure a lot better than say a bunch of shares in Exxon, plus PE has better returns (historically).
If you take a look at the Alaska Permanent Fund
Our Performance-Alaska Permanent Fund Corporation
APFC performance data, portfolio at a glance, and Alaska Permanent Fund market values.
apfc.org
Then the list of 2020 PE investments
Reports and documents - Alaska Permanent Fund Corporation
MissionBoard of Trustees Meetings & Past VideosInvesting for AlaskaREPORT ARCHIVE Report Archive Report Archive Annual Reports Trustees Papers Board Resolutions Board Minutes Board Packets Governance and Corporate Policies Private Equity Reports Private Income Reports Public Equity Holdings...
apfc.org
You know a guy in this fund...
Quantum hold some well know names like Parsley and Impact operators, Intensity which is a midstream company, Vantage Energy which was purchased by Rice -> EQT. I think Vantage was in V VI... they made a lot of money off of that investment.
Not sure whose in these specific funds, but Warburg backed the Citizen III take private of Roan Resources (ROAN)
Roan Resources Enters Into Definitive Merger Agreement to Be Acquired by Citizen Energy
Roan Resources, Inc. (NYSE: ROAN) (“Roan” or the “Company”) today announced that it has entered into a definitive merger agreement to be acquired by C
www.businesswire.com
Also those Co-Invest funds are typically doubling down on a specific company, if someone invests in say Quantum V then Quantum might come back to them and say hey this company is doing awesome do you want a preferred return investment on a specific company in that fund.
Basically Alaska is already investing a ton of their OG money back into OG companies all over the place. I'm not sure what the move signals, but I don't doubt they want to encourage development and they see this as a route to do it.
If it doesnt make economic sense why would the companies do it? Large oil companies arent in it to lose money. As such the oil price argument is ridiculous and short sighted as well.
AvidIndoorsman
Well-known member
- Joined
- Dec 9, 2015
- Messages
- 18,249
Fracking.
North slope is a conventional play, development made sense historically, the fracking boom has changed the calculus. Our industry has overproduced domestically and globally, prices were dropping and bankruptcies were rampant before covid, 2020 saw a major price drop and 54 billion dollars of bankruptcies.
Right now there are still several thousand DUCs, drilled uncompleted wells, in the Permian that haven’t been completed due to the price environment. So companies still have lots of oil to turn on that they are holding back. Oklahoma had 120 rigs running in ‘17 now it’s 12. That’s a proven play where you are doing infill, the least risky OG development possible... also best returns as pad drilling saves you big on a per wells basis.
If you look at where the refineries are and then population centers and then think of each mile as lost profit it makes a lot of sense. Why try to develop a new area, install all the infrastructure, pay for all the seismic, studies etc, when you produce just outside of Denver, Oklahoma City, Midland, couple hundred miles from NYC and Boston in existing proven fields. (DJ, SCOOP/STACK/Merge, Permian, Marcellus)
Prices will go up, and investors are looking for sure things, they have lost way too much money, EOG and Diamondback, for instance, will do fine they will find money. But the “MDs and Lawyers” have lost interest in oil and they are the ones who fund the riskier investments.
I know you want this to be a R v D thing for whatever reason but it’s not, it’s money.
Last edited:
AvidIndoorsman
Well-known member
- Joined
- Dec 9, 2015
- Messages
- 18,249
Agree
BP exits Alaska but leaves behind long Arctic oil legacy: Fuel for Thought
As a Prudhoe Bay operator, BP became known for technology innovations, including drilling the first commercially successful horizontal production wells.
www.spglobal.com
Pioneer Exits Alaska’s North Slope, Selling Its Assets For $550 Million
The company will focus on its Spraberry/Wolfcamp holdings.
I work in oil and gas too and am aware of all that.
Your point of view is looking about an inch I'm front of your nose.
The big oil companies think long term and long term ANWR may be needed.
I've been to ANWR. Pretty damn ugly country and very easy to explore and drill responsibly in the winter months.
And again the economics are known by the lease holder. If it wasn't and never will be economical they wouldn't be interested.
So why would Hilcorp purchase BP's stake.Agree
BP exits Alaska but leaves behind long Arctic oil legacy: Fuel for Thought
As a Prudhoe Bay operator, BP became known for technology innovations, including drilling the first commercially successful horizontal production wells.
Pioneer Exits Alaska’s North Slope, Selling Its Assets For $550 Million
The company will focus on its Spraberry/Wolfcamp holdings.www.google.com
AvidIndoorsman
Well-known member
- Joined
- Dec 9, 2015
- Messages
- 18,249
Exactly? Short term untenable, long term it's still in the ground if the economics and capital markets change.
Are we disagreeing about something?
AvidIndoorsman
Well-known member
- Joined
- Dec 9, 2015
- Messages
- 18,249
Go ahead and make your point?
As such what is the issue with offering up leases now then?
Hilcorp isnt in to lose money..
Last edited:
Irrelevant
Well-known member
That you get the highest price when you have multiple high dollar interested parties bidding against each other vs offering the leases when none of the deep pockets have any interest at all and the freakin' state of Alaska picks up over half of them in what sorta appears to be a matter of principle.
AvidIndoorsman
Well-known member
- Joined
- Dec 9, 2015
- Messages
- 18,249
It’s our land correct? I own 1/300millionth of it with you and it’s held in trust by the feds. If that was your ranch would you want to offer it for lease? Wouldn’t you rather wait for more money?
SAJ-99
Well-known member
What appears to be happening is the US industry is understanding it is the marginal global producer because of its cost. Sure prices will go up, but SA and Russia can flood the market again and drive prices lower leading to more bankruptcies in the overlevered players. This makes it hard to lend money to these E&P projects. To your point, ANWR’s oil value is as a reserve. Like a second SPR. Add to that the long term picture for O&G (decades) is bad if you are an investor. More EV, Solar, new scientific stuff being worked on. It is pushing the industry to see themselves as Energy cos not O&G cos. Eventually we will simply extract CO2 from the air and turn it into fuel. These are the types of things the mega players are investing in. The easy money in this area is gone.
AvidIndoorsman
Well-known member
- Joined
- Dec 9, 2015
- Messages
- 18,249
“The state-owned entity which dominated the sale, has never held federal oil leases before.
But Alaska politicians, including former Republican Gov. Frank Murkowski, recently pushed the state to bid, citing the lack of industry interest. Murkowski, in an interview Wednesday, said he expects the corporation to eventually partner with companies to do the actual drilling.”
Major Oil Companies Take A Pass On Controversial Lease Sale In Arctic Refuge
After a three-year push by the Trump administration, almost no oil companies offered bids. Analysts point to controversy, low oil prices and an incoming administration that opposes drilling.
www.npr.org
Then you shouldn't worry about the area being developed.
AvidIndoorsman
Well-known member
- Joined
- Dec 9, 2015
- Messages
- 18,249
I agree. To your original question, I can speculate... but it's just that
BP has a ton of assets, they prefer to direct the capital to big campaigns, not administer aging assets. If you have 1,000 to spend are you going to put it in something with a 2% return or 15% return.
1. BP wasn't going develop the asset.
2. It's a public company and faces pressure about climate change, gulf, etc. ANWR isn't a good PR move for them
Hilcorp
1. Likely got a good deal in terms of cash flow, I doubt they paid too much more over PDP... that's a guess
2. Hilcorp is private they are shielded from a lot of the stuff BP has to worry about
3. Hilcorp is in the business of these kind of mature assets, I assume they planned on doing infill, maximizing efficiency, cleaning up wells, re-completing etc. squeezing every drop out of the asset.
Of note is Hilcorp was denied it's permit for it's Liberty island project in early December, will be interesting to see what happens there.
Similar threads
