Wednesday, October 31, 2012

Selling Time?

Over the past couple of years as companies are having fire sales of "non-core" assets that often times seem pretty choice, I've noted that there haven't been any big Haynesville sales.  Sure, there have been JV deals, farm-outs, etc. but those are more for efficiency.  There have been some corporate sales, like BHP buying Petrohawk or Exxon buying XTO, but that's more about cashing out.  But it seems that many companies with serious positions in the Haynesville are reluctant to let that acreage go.  Maybe I have a rosy outlook, but I think many companies recognize the uniqueness of the play and are waiting for gas prices to turn.

But a comment in EXCO Resources's Q3 conference call got me thinking. The analyst is asking a follow-on question about a comment that CEO Douglas Miller made regarding increased deal flow of sellers, including in the Haynesville Shale.  Here's the quote:
"David Neuhauser:
And are you looking at a company that sells -- I mean, companies that might be a little bit levered, that shut-in a lot of production or have underdeveloped acreage that you can maybe just acquire and take a bigger bite?
Douglas H. Miller:
Well, we would. I'd say we're looking at a couple of companies. Right now, I'd say 5 or 6 of the deals we're looking at are private companies that just want to sell by year end for tax reasons. I'd say public companies that we've talked -- that would be a bigger challenge. Public company deals takes a long time. I would say we would focus -- we have looked at a couple. Investment bankers show them to us every day. They're probably not out loud for sale. But there are companies with assets in our neighborhood that we will for sure talk to, that have either quit drilling in the Haynesville or cut it way back."
The emphasis is mine.  I've heard chatter about some companies that are pulling back and might be in more of a contraction mode.  At some point, a company with a significant Haynesville investment that has refocused on oil, is pessimistic about natural gas prices or is unable or unwilling to hold stagnant assets for the long term might be ready to move.  With gas prices creeping up, this might be the time to sell, although it would still look (and be priced) more as a fire sale.

I'll keep my ears open.  Year-end should be very interesting.

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