A land grab of sorts is underway in the oil industry as players big and small buy up companies and swaths of land with oil and natural gas reserves discovered - or undiscovered - below them.
The most recent deals come from XTO Energy Inc. and Chaparral Energy Inc. On Tuesday XTO bought $2.1 billion worth of properties across several states from undisclosed sellers. XTO also recently spent about $6 billion buying Hunt Petroleum Corp. and other associated entities, and acquiring property in Montana and North Dakota from privately held Headington Oil Co. Meanwhile, Chaparral Energy Inc. spent $510 million buying Edge Petroleum Corp.
Dallas Parker, a parter at Thompson & Knight LLP in Houston, says the most aggressive acquirers at the moment are Chesapeake Energy Corp., Petrohawk Energy Corp., Plains Exploration & Production Inc. and Range Resources Corp. "It's reverberating around the industry," he said. But he warns that conditions may have gotten somewhat frothy: "Values are getting very high on not very many wells drilled or proven. To a certain extent it's become speculative."
Still, Parker thinks the major oil companies may get involved, as it's really the new frontier in the oil industry. BP plc has already jumped in, announcing last week that it agreed to pick up 90,000 acres of natural gas properties in Oklahoma's Arkoma Basin Woodford Shale region from Chesapeake for $1.75 billion in cash. And ExxonMobil Corp. has been rumored to be interested in Devon Energy Corp. - the largest player in the Barnett - for awhile. Said Parker: "It's really exciting to a lot of people."
But now that oil prices are sinking, will the dealmaking slow? A lot of folks think this is a temporary drop and oil prices will stay elevated. "I don't see the price of oil sinking below $100, except for a depression," says Michael Economides, a chemical engineering professor at the University of Houston and an adviser to national oil companies. "Geopolitical factors will play a big role." - Claire Poole
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