Several large entities are consolidating in the Permian, and in the industry generally. Pundits have implied there are a dozen or so more targets. We are in for a realignment that will not be short or smooth.
I was interviewing a private equity banker (for a later post) and the conversation came to the consolidations in the patch. Since they had represented investors in that activity, and they’d been involved in the transaction and consequent business process realignment, we talked about what energized the transactions and what the results were. The consolidations usually were between entities with cash but no opportunity to invest (causing high tax load), and entities with lots of investment opportunity but no cash to do it. The objective is/was to keep and apply the best business processes from each entity, shed the low performers, optimize administrative operations, and apply free cash to latent opportunity to create new cash flow. It sounds entirely rational on the surface, but at some level the reasons these entities have had different outcomes is because they think differently, perhaps in ways that are incompatible.
Consolidations are at some level large transactions. Value needs to be established. In our business the provenance of rights owned matters, it’s the foundation on which value is built. I was chatting with a landman turned lawyer at a recent landman association meeting. He described a recent project where a client had difficulty with completing due diligence during the time allotted. I wish he had reached out to us at TexhomaLand. While prior results are no guarantee of future performance, we’ve never not completed due diligence within the time allowed. For 3 decades, encompassing billions of dollars in transactions.
If you are considering a large transaction such as a consolidation, or are assisting with one, and your land office or landman services provider needs some extra resources, please reach out to me at email@example.com, or check out our website at TexhomaLand.com.