As the end of a year of challenges unparalleled by any in recent history approaches, many people in oil and gas are still left with questions about the future of activity within the industry. It was previously thought that the dramatic drop in demand and oil prices in the past year would result in larger companies grabbing up smaller companies at a bargain, but what we have seen so far is a sharp decline in mergers and acquisitions. The uncertainty brought on by the pandemic and the persisting oil crisis has shifted the focus from growth to sustainability. As reported by David Blackmon, we are seeing companies be more conservative with the potential acquisitions, setting themselves up to acquire high quality over high quantity assets. According to Enverus Senior M&A Analyst Andrew Dittmar, “this may finally push the industry into healthy consolidation that leaves us with larger, more efficient, and better capitalized operators when the recovery starts.” Though activity has been slow in the past few months, it has not stopped altogether. Recently, Chevron acquired Noble Energy in a multi-billion dollar deal that brings low-cost, high-quality assets to Chevron’s portfolio, which was possible due to their strong balance sheet and financial discipline, according to Chevron CEO Michael Wirth. In a resourceful move Devon and WPX, the two companies formed a merger that will benefit all parties by increasing cash flow and decreasing debt, reinforcing their financial profile.
When mergers and acquisitions in the industry resume, companies looking to sell will need assurance that the assets are of good quality in order to get attention in a buyer’s market. Irina Slav with Oilprice.com writes about a report released by EY in May pointing to buyers “looking at resilience beyond financial metrics to encompass long-term value and premiums related to carbon risk.” OTA Environmental is a full-service firm focused on the oilfield. We provide a wide range of due diligence and compliance services such as Air Permitting, Leak Detection and Repair, Greenhouse Gas Reporting, Spill Prevention, Control, & Countermeasure (SPCC) Plans, Method 22, Phase I & II Environmental Site Assessments, and more. Our experienced staff strives for innovative solutions that reduce environmental risks for sellers prior to a transaction. Similarly, we utilize our environmental and business knowledge and technical resources to identify and quantify potential risks and expenditures for buyers and develop or eliminate those risks post-transaction.