PURCHASED U.S. RESERVES SHOW VALUE DECLINE

The sale value of U.S. reserves slipped a little in fourth quarter 1994.

Strevig & Associates, Houston, pegs the fourth quarter value at a median $4.50/bbl of oil equivalent (BOE), down from the revised third quarter value of $4.58. The slight decline follows three quarters of rising values.

Strevig derived the median from 64 transactions, a 19% increase from the revised number of deals, 54, closed in third quarter 1994. The total value of transactions was $831 million, a 13% decline from the revised $958 million traded in the third quarter.

Two fourth quarter deals equaled or exceeded $100 million, and two fell in the $50-100 million range. All others were below the $50 million mark.

Eight of the 64 deals represented 72% of the total value traded.

(Table-U.S. Purchases of Production)

GAS IS NO. 1

Strevig's figures show natural gas is still the favored product, accounting for 74% of the number of deals. Gas also accounted for 79% of the reserves volume traded.

Median price paid in purchases involving a significant amount of natural gas was 75/Mcf, a 1c decline from the revised third quarter 1994 median.

The ratio of reserve values to wellhead prices in the fourth quarter yielded an above average 32%, compared with the historical 30%, depicting a market in favor of the seller for the sixth consecutive quarter.

The market eased in prices paid for oil and gas reserves. However, the 1994 fourth quarter median is about 10% higher than the fourth quarter 1993 median.

Several large transactions disclosed during the fourth quarter were not reflected in the Strevig figures because transactions are not included in the report until a closing takes place.

OFFSHORE SUMMARY

There were 33 purchases of offshore reserves in 1994, the same as in 1993.

Total money spent in offshore trades was $787 million, down almost 40% from $1.3 billion in 1993. The average transaction was about $33 million, and the median value was $5.27/BOE, a 10% decline from the 1993 median.

Gas made up 59% of the reserves volume traded, while gas-dominated transactions represented 72% of all U.S. offshore purchases completed in 1994. The median value for offshore reserves was 88e/Mcf, a 17% decrease from the 1993 median.

Proved developed reserves acquired amounted to more than 133 million BOE.

After an encouraging 1993, the offshore market seems to have lost some of its luster, Strevig said.

The deal size, as well as prices paid for reserves, have declined. Part of this lack of interest is due to the uncertainty of oil and gas prices.

Additionally, the firm said, word has it that some of the smaller players have been blocked from the market due to difficulty in establishing financial clout required to deal with environmental liabilities.

1994 SUMMARY

U.S. reserve values showed consistent improvement through the first three quarters of 1994, ending with a slight decline in the fourth quarter, unlike the rollercoaster ride of 1993.

While quarterly median values were up for the year, there is still uncertainty about wellhead prices.

Fierce competition in the market continues to be the dominant factor in the minds of operators and investors alike, as seen in the generally increasing trend of prices paid for reserves, Strevig said.

The median price paid for all of 1994 purchases was $4.50/BOE, up less than 10% from the 1993 median.

The number of transactions reported decreased slightly from 245 in 1993 to 226 in 1994. Total value of the trades was $3.4 billion, down slightly from $3.8 billion in 1993.

Eight transactions, compared with six in 1993, equaled or exceeded $100 million. This accounts for about 47% of the total value of transactions.

Trades valued at $20-100 million totaled 26, leaving about 82% of the transactions concentrated under the $20 million threshold. The average transaction size was $18.4 million during 1994.

Natural gas dominated throughout 1994, representing 67% of the number of transactions and 70% of the reserves volume traded. The median price for transactions involving a significant amount of natural gas was 74/Mcf, an increase of 3 from 1993 and 1992 values.