BP is entering the US unconventional to gain on other IOCs in the large-scale multiple plays game, says GlobalData
Following the news (Friday 27 July) that BP is to acquire BHP’s US onshore unconventional positions in Permian, Eagle Ford and Haynesville and the analysis of Q2 earnings from ExxonMobil and Chevron, Adrian Lara, Senior Oil & Gas Analyst at GlobalData, a leading data and analytics company, offers his view on how this will impact the upstream sector:
“BP has definitely paid a premium on the US$10.5bn deal, based on GlobalData’s analysis of existing production acreages and expectation for undeveloped positions. The undeveloped acreage has different net present values depending on whether it is Eagle Ford, Permian or Haynesville. The Permian acreage is of particular value given its stacked formations, thickness and the available infrastructure. The current pipeline bottlenecks are a short term issue which should not matter much in the longer term strategy of acquiring unconventional assets with large reserves and quick development timeline.
“As with any other major international oil company (IOC) in the US unconventional sphere, the expectation for BP is to use its main advantage over more traditional mid and small size operators, which is the amount of capital expenditure (capex) the company can pour into large drilling programs and the operating efficiencies it can gain due to scale.
“This is exactly what ExxonMobil and Chevron have accomplished for a continuous increase in production in their Permian positions. The two companies are currently operating 34 and 19 rigs respectively in the play, aiming for double digit growth.”