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The Buyer-Seller Gap: Oil & Gas Acquisitions Report

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Oklahoma City, OK. — October 28, 2015 — *(There are hundreds of ways to find value in an asset. In this article, in order to illustrate the gap, we use a monthly forecast and an estimated barrel price.)

As the third quarter reports start to arrive this week, the world outside of oil and gas will see how hard this industry has been hit. There will be talk of acquisitions and non-core divestitures, however, for the majority of the field, the gap that exists between the buyer and the seller is still extensive.
Oil and gas companies that are considering an acquisition strategy are using the days strip price, rounded to the nearest dollar. Whereas the average seller’s baseline barrel price is, on average 16% higher than strip pricing.

Buyers, as a whole, have moved their offers into the 40 month net range. This is much higher than the 24 month offers that have circulated for the past six months. The gap between buyer and seller is tremendously visible in this metric. The sellers, on average, are asking for offers in the 70 month net range. Our findings show an average difference of 27 months using this metric.

Source: Beachwood Marketing

Source: Beachwood Marketing

Closing the Gap

Currently, uneconomic wells may show development potential, and as service costs continue to drop, this is the area that will see the highest reallocation of value. The best deals on the market are located in areas that have the highest service competition, which results in the lowest operator expense.

HEI contributor Josh Robbins of Beachwood Marketing.

Twitter: @BeachWoodMG

 

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