U.S. oil property sales set record in 1997

Transactions, 1997 [49,755 bytes] U.S. Upstream A & D activity [61,036 bytes] U.S. oil and gas property sales hit a record level of $23 billion in 1997, according to Randall & Dewey Inc., Houston. The annual total was more than three times the largest amount recorded since Randall & Dewey began keeping track of these transactions in 1989. The year started with a bang, with first quarter acquisitions and divestments (A&D) totaling $3.3. billion, according to the firm's quarterly analysis of

April 20, 1998

2 min read

U.S. oil and gas property sales hit a record level of $23 billion in 1997, according to Randall & Dewey Inc., Houston. The annual total was more than three times the largest amount recorded since Randall & Dewey began keeping track of these transactions in 1989.

The year started with a bang, with first quarter acquisitions and divestments (A&D) totaling $3.3. billion, according to the firm's quarterly analysis of industry A&D.

David L. Bole, vice-president of corporate research and development, said demand for acquisitions and "a hefty increase in transaction values" in 1997 helped "draw out additional supply." He said the resulting transaction "boom," as well as the size and diversity of the individual transactions, "certainly commanded the attention of stakeholders in all industry segments."

Of the $23 billion in transactions, deals worth $19.7 billion involved reserves of 3,528 million boe, yielding an average acquisition cost of $5.58/ boe, Bole said. By comparison, the average acquisition cost for deals in 1996 was $4.34/boe.

Bole pointed out that the sheer number of deals greater than $100 million, 36 in 1997 compared with 15 in the 1990s, was the driving force behind the increased per-unit acquisition costs.

He believes 1997 may prove to be an "aberration" in the marketplace. A need to cut costs in order to improve margins, combined with weak commodity prices and a slide in oil company share values, may lessen the "depth of the (transaction) market.

"But as we have already seen in the first quarter of 1998," he added, "mergers and acquisitions momentum is likely to continue."

One haunting question remains: "Will the A&D market continue with the same depth (in terms of transaction values) if crude oil prices continued to slide?," Bole asked.

"If growth via the drillbit is slowed, there will be more reasons to expect that E&P companies will strengthen themselves through mergers and acquisitions to exploit new opportunities and fend off competitors."