The Energy Question Episode 44 Andrew Dittmar Enverus

 

David Blackmon [00:00:02] Okay, here we go. Hey, welcome to the energy question with David Blackmon. I’m your host, David Blackman. And my very special guest today is Andrew Dettmer, a director at Inverse Guy, who I’ve talked to many times before. And we’re going to be talking about mergers and acquisitions in the energy space. Andrew, how are you doing today?

Andrew Dettmer [00:00:22] Doing great, David. Happy to be here and always happy to be talking a little upstream in the nest.

David Blackmon [00:00:27] Yeah, boy, I’ll tell you it. You put out a report on the first quarter here a couple of days ago and turns out the first quarter. You know, I think coming into the year, many folks thought this was going to be a really busy year with M&A activity in the upstream space. And first quarter didn’t quite work out that way, did it?

Andrew Dettmer [00:00:49] Yeah, we had had our challenges. Few good deals got across the finish line. The Matador acquisition of Advance in the Delaware was a little bit more along the lines that we thought we’d see this quarter.

Andrew Dettmer [00:01:00] Lots of public companies that need inventory, lots of private companies or some private companies anyway, that have inventories still up for sale. And that’s kind of what we thought was going to be the driver growth of M&A activity.

Andrew Dettmer [00:01:12] So we got off to a good start with Matador, but didn’t get as many of those done in the quarter as we thought. What was kind of surprising this quarter was how active the Eagle Ford was.

David Blackmon [00:01:20] Yeah, Yeah, I was going to ask about that. What’s going on? You know, I mean, the Eagle Ford had been kind of moribund for so many years and now suddenly, you know, we’re having all this activity down there. What’s happening?

Andrew Dettmer [00:01:32] Yeah, that’s right. Did bit over 5 billion in Q1, I think was the best quarter we had in the Eagle Ford, gosh, in almost ten years. One of the top three, certainly since 2010. So really driven by the Chesapeake exits the sale to wildfire up in the Eastern Eagle Ford Valley and College Station area. So that idea of the LA media classified as being that and then the INEOS sales, the more traditional South Texas assets as well as the Bay Tech stepping in to buy a ranger.

Andrew Dettmer [00:02:04] So you know, our view the Eagle Ford is a good place for people to be shopping for deals where you want to buy essentially for the value of the existing production. So these deals are transacting out PDP ten, we would say, or even a discount rate higher than 10%. So as the discount rate goes up, the deal value goes down.

Andrew Dettmer [00:02:24] And we’re seeing these deals with like a PV 15 discount on current production. So you’re buying just for the value of production, but you’re still getting some incremental inventory along your three, you know, the smaller Eagle Ford, which is kind of the primary target in the player running room left and then our analyst teams that excited about what’s going on with Austin Chalk, particularly over in the western part of the play, some of the Web county stuff.

Andrew Dettmer [00:02:46] So in terms of the value proposition of the Eagle Ford is in an attractive spot is in buying PDP is an interesting strategy for some of these companies that are outside sort of your mainline Diamondbacks and pioneers of the world. So smaller companies, international buyers, private companies, that’s kind of what we’re seeing step into the Eagle Ford.

Andrew Dettmer [00:03:08] And that really was the case so far this year where I think that all of the big buyers, the main part of the Eagle Ford, INEOS and Vertex came as new operators and from outside the U.S., well, fire was kind of the one logical player for that Eastern Eagle Ford piece instead of the old wild horse team buying their asset back that early right word, which was their neighbor there. So kind of expected that they would do that deal. But a little surprised to see INEOS come in on the main Eagle Ford partner.

David Blackmon [00:03:41] So what’s happening with Chesapeake? I mean, are they just trying to focus like become almost a pure play Haynesville producer now?

Andrew Dettmer [00:03:49] Yeah, pure play gas for sure. So let me say between the Haynesville and Appalachia, Marcellus, a little more inventory in the Haynesville that probably will be were a little bit more of their growth is headed. Well, I don’t think anyone wants to hear growth in Haynesville in the same vein at this.

David Blackmon [00:04:05] Point, these prices and.

Andrew Dettmer [00:04:06] Is prices, You know, it’s a tough time making the pivot. I think it was a good strategic decision at the time they launched it back in 2022. Gas prices were doing really well. It was easier to write a longer term bull case for gas, which is still in play.

Andrew Dettmer [00:04:19] I think if you look multi-year out, that’s where U.S. LNG is going to come online. Eventually gas is going to transition towards being more of a global commodity like oil as LNG exports. Let us move it around. Europe obviously needs U.S. gas with the Russian supply is cut off, simplifies the portfolio. You know an easier story to tell investors. That Eagle Ford asset didn’t really have a place in their go forward plan.

Andrew Dettmer [00:04:43] So I think it was a good strategic decision to give time. It’s just kind of rough the way commodity prices have moved on them subsequently where gas has gotten hammered over the last six months or down from north of six bucks in December to were bouncing around in the low twos right now on the front lines. Yeah.

David Blackmon [00:04:59] Yeah. Well it’s like you say, I mean the more we can internationalize the demand for it, the opportunities there for these producers to ship it internationally, the better hopefully their price picture will become. Yeah, I wrote a story this week about a big new LNG terminal just got approved down by Brownsville. And so that industry is expanding on I guess in the next few years. We can probably hope some improvement in the domestic price for natural gas, right?

Andrew Dettmer [00:05:33] Yeah, absolutely. It’s fun to see is as a personal anecdote, took a couple of days off the last week and went down to Port Aransas on the Texas coast, which is just outside Corpus. So yeah, sitting in a sleepy little fishing and beach town, having a drink and a fish sandwich, look at the. The ship channel is this massive thing headed out, massive ship with big compartments on top.

Andrew Dettmer [00:05:55] And that’s kind of like an LNG tanker. Yeah. So? So they look the ship up and you can track and track these things. And it was in fact LNG headed from headed from Corpus to Rotterdam. So US gas headed to Europe. So it’s cool to see that in place. Yeah, absolutely. Expect more of that. And do you think that eventually. Right.

Andrew Dettmer [00:06:14] We’ll head towards the international market, you’ll see a recovery in gas prices. It’s going to take time to build these outright big, complicated projects. You’re probably looking at best case 24 or maybe 25 or 26 before you get that meaningful, sustained recovery in gas prices.

Andrew Dettmer [00:06:29] You could see it in the interim, but we ultimately head towards a more internationalized market with a much higher floor for North American gas, which I do think makes this an overall attractive time to be long gas.

Andrew Dettmer [00:06:43] You know, we haven’t seen a lot of those deals get done. And that’s one of the reasons that M&A activity came in lower than we expected last quarter, is gas deals were absolutely nonexistent. There was one gas deal, a couple hundred million diversified, which tends to buy the oldest most legacy stuff that nobody.

David Blackmon [00:07:00] Right Yeah yeah.

Andrew Dettmer [00:07:01] Or almost orphan wells at very attractive prices so they did a deal they added added some incremental production there. But none of the big gas deals that we thought would get across the finish line happened. You know, the thought that Rockcliffe was close to finding an exit.

Andrew Dettmer [00:07:15] Some of the big Appalachian producers been on the market, but it’s tough to to drop a sales price. I think you’re going to get a $6 gas and then a buyer comes in with a bid based on $2 gas for you. And then because because that LNG story is so well telegraphed and I’m on board.

Andrew Dettmer [00:07:31] I think you’re on board. Everybody’s on board, unless you have some real pressure that you need to sell in the next year or two, maybe you’re going to sit this out with that recovery in prices and think, yeah, a whole lot more than 25.

David Blackmon [00:07:44] Yeah. And you mentioned, of course, a very little activity in the Permian. You had the Matador and Advance energy merger. Then you also had Diamondback do a kind of smallish transaction. $439 million. I guess they were just divesting some non-core assets out there.

Andrew Dettmer [00:08:02] Yeah, absolutely. You know, Diamondback was a pretty active buyer. Last year, they did the Firebird deal. They did the Larimer stepped up their portfolio. Not that they necessarily need it. You know, they’re in a great position in terms of acreage and inventory. But kind of a natural follow on of the bigger M&A deals as you comb through and you find assets that don’t have a lot of value in your portfolio right now and trim those down.

Andrew Dettmer [00:08:24] So we have probably room for more of those types of transactions to occur. And it is a good chance to find a value accretive, a win win deal for buyers and sellers where you have inventory that isn’t going to get drilled because it’s not high enough quality for a Diamondback or a Pioneer or even an EOG.

Andrew Dettmer [00:08:42] You can look outside the Permian, see some of those, some of the assets that are sort of being held up in the Williston and the Bakken that aren’t in the line of development in the next ten years for a big company or a major. But they would slot right to the front of it of a small cap drilling opportunity just because they’re so light on inventory.

Andrew Dettmer [00:09:01] So we haven’t seen a lot of those types of deals, but we do think there is room for more noncore sales from from the big companies. It brings some value forward of things that essentially have no value in their portfolio.

Andrew Dettmer [00:09:11] And even paying for upside, it’d be value added to the mid-caps and the smaller companies because you’re filling out your inventory and really tackling what is your main issue, which is you only have a couple of years of high quality drilling left and your investors get in on that and they love the cash flow that you generating now, but they’re not going to buy your stock. They you’re only hold that rather two or three years before you run out of stuff to drill. Yeah.

David Blackmon [00:09:35] You mentioned in your report that you put out the potential for some activity around mergers of equals in the mid cap space and small cap space. What are the factors behind that?

Andrew Dettmer [00:09:49] Sure. So we haven’t seen a lot of corporate M&A lately. We kind of had a big wave as you came out of COVID and we got the Pioneer Parsley deal, Conoco buying Concho. Yeah, So really, really active wave. And it’s been pretty quiet since then. But there’s a lot of mid-caps, right, that we really just don’t need to be honest.

Andrew Dettmer [00:10:08] The industry is consolidate a long way, but there’s more room to go. And just the typical right that you’re going to find in these kind of mergers, you get increased scale, you have a larger float, you have some synergies in terms of cutting.

Andrew Dettmer [00:10:21] Operational costs are able to run even leaner, which is industry has done a good job of doing, but there’s always room for improvement on Friday. You’re not necessarily going to sell over your inventory issues. You take two mid-caps that are both light on inventory and you marry them together.

Andrew Dettmer [00:10:35] Just can have a somewhat larger company, let an inventory, but it does give you a larger base to maybe go out and tackle the and market and see what you can do in terms of adding some assets and extending that out.

Andrew Dettmer [00:10:45] So yeah, definitely still some room for these mid-caps to combine narrow down that space and then there’s a potential for mid-cap to be targeted by a large cap buyer. But I don’t know if they’re going to be real attractive to the Diamondbacks or pioneers of the world just because they don’t really bring that inventory to the table.

Andrew Dettmer [00:11:05] I think they’re looking at a very limited set of high quality opportunities that are still in the space. The private unicorns are kind of the ones that get talked about the most. So there’s the crown question of the world, the endeavors. We don’t know that they’re going to be for sale, but I think if they were to potentially be for sale or opened offers, they would get a lot of interest from from a pioneer or even an excellent-level company.

David Blackmon [00:11:29] Well, and you talk about that. I mean, of course, the Pioneer two Exxon rumor popped up like three weeks ago now before we recorded this. And of course, that was at a time when Brant was sitting at about 86, and today it’s at 72.

David Blackmon [00:11:47] And, you know, WTI was about 80 and now it’s 68. Just kind of wonder, you know, as you look to potential deals like that between two really big companies. How does this, you know, kind of dramatic drop in the price with a difficult economic outlook Now, how does that impact you, do you think, in terms of potential for those kinds of big deals being made?

Andrew Dettmer [00:12:16] Yeah, it’s it’s not great for big deals or small deals. Yeah, we just talked about that a little bit on the gas side. But that movement down, volatility is bad for M&A and volatility downside is bad for M&A. So when you have, you know, volatile prices to the downside, that’s just a really tough combination to work around in the market.

Andrew Dettmer [00:12:35] So I think there probably are some big deals, you know, that potentially could have gotten done at a more stable or higher price and small ones that are going to be delayed by this movement down. And then the uncertain economic outlook. You know, I think the I’m certainly not none of it looks right.

David Blackmon [00:12:52] I’m not sure.

Andrew Dettmer [00:12:54] I’ll let that one pass. But yeah, a pretty significant rate hike cycle here over the last year or so. True, some of the Fed’s done that. We’ve had some kind of recession. And so the debate amongst those who know more and follow that more closely than I am is that we’re headed for a recession. And it’s been this mild versus severe situation. Yeah, we actually thought oil prices were going to be fairly resilient even with a recession victims.

David Blackmon [00:13:18] And they may still be in know.

Andrew Dettmer [00:13:20] May still be. That’s right. We could get a recovery. But certainly the way things are looking at the moment, it’s a little tougher for deals. You I think that $80 is a really good point for M&A to transact at. That’s kind of where we saw some of these rumors of bigger deals and some more transactions get done.

Andrew Dettmer [00:13:34] If you think out of where we’ve been over the last few years, you know, we’re a cyclical business. We’re always going to be one that we’ve traded from about a 60 to $100 range will call it. And so eighties right in the middle of that.

Andrew Dettmer [00:13:46] Sellers are feeling that they’re getting a good price on their assets and not selling at the bottom of the market. At that kind of pricing point, buyers are feeling maybe there’s still some more upside to be had or they’re not at least buying at a peak at $80.

Andrew Dettmer [00:13:58] So I think somewhere in that range with fairly steady prices is where you really see oil and gas M&A take off. And then as you approach either that trough at 60, you know, seller start to step out, as you approach that peak, around 100 buyers get a little nervous about getting caught out by those top and those maybe make them a little bit more challenging.

David Blackmon [00:14:19] Yeah. And of course, at the same time, Exxon sitting on an awful big pile of cash. That’s right. And Chevron is too not quite as big. And of course, ConocoPhillips has a lot of cash on hand as well. So, I mean, these potential buyers are very well positioned right now to do some acquisitions to build that inventory. And I’ve just got to believe the pressure’s kind of building up to do something with all this cash, right?

Andrew Dettmer [00:14:48] Yeah, absolutely. I mean, Exxon and Chevron, these are companies that think in decades of a six month, 66 month sell off in oil prices is going to phase then. So I think it’s just a matter of picking your spot. You know, again, sellers being willing to transact at these price points, coming to deal terms and then yeah, just just making the transaction work.

Andrew Dettmer [00:15:14] But I absolutely agree that these companies are looking globally at what is your opportunity set. It’s getting tougher and tougher right ups to source like global hydrocarbons. You’ve taken Russia off the table in terms of being available for investment for Western companies for probably, certainly my foreseeable future.

David Blackmon [00:15:33] Yeah, at least a decade, you would think.

Andrew Dettmer [00:15:35] Least a decade. There’s some exciting offshore stuff being done. I mean, certainly is an opportunity. Oh yeah. Although that country is sort of yo yoed in terms of political direction as well.

Andrew Dettmer [00:15:46] So you’re looking at what’s available that’s left where you can buy high quality supply in a in a politically stable country. And despite our sort of internal debates, you know, I think we still got us pretty politically stable here.

Andrew Dettmer [00:15:59] The Permian looks awfully attractive from a global perspective, and it is going to be a centerpiece for the Exxon’s and the Chevron’s of the world for a long time still to come. And they absolutely want to consolidate those few last big opportunities that are left.

Andrew Dettmer [00:16:12] So, yeah, you surprised to see them go after a pioneer? I mean, Scott Sheffield is stepping down at the end of the year. So certainly you can read the tea leaves that it might be an opportune time for Pioneer to look at an exit as opposed to trying to transition to a new leadership.

Andrew Dettmer [00:16:28] Although of. They have a great team in place as well. I think, again, the endeavor is one that would be of interest to these type of companies if they were to put themselves up for sale. Conquest, although they’re not quite the scale of the pioneer endeavor. But I wouldn’t be surprised to see one of those megadeals come across the line.

David Blackmon [00:16:46] Yeah. Do you think, Pioneer you know, when you look at pioneers asset based, it’s almost entirely in Texas. Yeah, that’s actually a fairly significant advantage, right? If you’re if you’re a company with a big asset like that asset base like that, and a state like Texas that is very, you know, always been a petroleum friendly state, that’s kind of makes it more attractive as a takeover target, doesn’t it?

Andrew Dettmer [00:17:15] Yeah. I mean, if you’re looking at some we can talk about global regulatory risk for them where in the globe is the lowest regulatory risk possible? Rural Texas is probably right up at the top of either West Texas or South Texas. Eagle Ford, they like their oil at the local level, the state level.

Andrew Dettmer [00:17:32] You take the federal lands issue off the table. It hasn’t played a major role, obviously, that that still lies in the back of your mind, that there could be some change in regulations. You’re subject to whatever the latest administration in Washington is at playing His position is pretty astounding and hard to replicate them.

Andrew Dettmer [00:17:48] I think they have around 9000 net locations in the middle of India, you know, throughout an endeavor, which is a great company, but they’re much, much more like 50% or something of that, I think is just figuring out pricing and and where can you get that deal done?

Andrew Dettmer [00:18:08] And there’s sort of past waves of M&A we’ve had like say, out of COVID, some of these smaller deals, they were priced essentially no premium to where the company was trading at maybe factory or something.

Andrew Dettmer [00:18:18] But I don’t think Pioneer is going to sell themselves at an equity value, at a trading valuation or for a 10% premium they’re going to be looking at. Where’s their all time high? I mean, can we get like a meaningful. 20 or 25% premium over our equity as it stands now.

Andrew Dettmer [00:18:39] And Exxon, as much as they may want, that resource is also a very cautious company that doesn’t overpay for things. So just do it. Strategically, I think the deal makes a lot of sense. It’s just when you get to that scale, can you figure out a price point that’s going to work for the buyer and seller?

David Blackmon [00:18:55] We hear a lot about, you know, some building pipeline constraints coming out of the Permian. Is that having you think any kind of a dampening impact on the willingness of people to do these deals right now?

Andrew Dettmer [00:19:12] I don’t think it’s.

David Blackmon [00:19:13] Or is it just not a real factor packed?

Andrew Dettmer [00:19:16] Yeah, Obviously you need the gas takeaway capacity. Don’t want a flare if you can avoid it. Yeah, but the Permian is not so infrastructure constrained. I think that you’re really going to have a meaningful impact on deals at a basin wide scale.

Andrew Dettmer [00:19:34] There might be some particular counties, particular areas where you’re looking at an asset and looking at what capacity is available and you’re adjusting your transportation costs. It’s affecting the economics of the deal and not going to make it work.

Andrew Dettmer [00:19:45] But I don’t think at a Permian wide scale, it’s, you know, it certainly impacts on the margins. I’ll make up a number, right. So like five, 10%. But but it’s not it’s kind of like we get asked sometimes about the ESG side and is that impact of deals needs to be emissions accretive. And I think it matters, but it doesn’t it’s not going to drive a deal by any means.

David Blackmon [00:20:06] Yeah.

Andrew Dettmer [00:20:06]  but what drives the deals with what always has? What’s the production profile look like? What are you paying for that production and what does the undeveloped acreage inventory look like and how does it fit in your portfolio? These other factors kind of fit in on the margin, but you have to have those core pieces in place and then you can make everything else work.

David Blackmon [00:20:23] On the other hand, you get up in the Appalachian, right? And you not only you’re dealing with with a commodity that’s priced depressed and then you have these these takeaway capacity constraints means you got to have an impact and deal. Yeah they’re.

Andrew Dettmer [00:20:40] Absolutely. Gas plays are a whole different story right. Yeah you can get very pipeline constrained and I mean well the worst case you can you don’t want them to flare some gas and put it oil on a truck and move it out.

Andrew Dettmer [00:20:52] You don’t have takeaway capacity in Appalachia. You’re stuck. I think the other thing that’s interesting there is we’ve seen this equity Tuthill deal get held up by the FTC for antitrust.

David Blackmon [00:21:02] Yeah

Andrew Dettmer [00:21:03] Yeah. You know, if it was kind of the natural consolidator of that basin, it was certainly moving in that direction. And now they can’t get that deal across the finish line. So I think that maybe is going to make them take a step, certainly will make them take a step back in terms of what they can do.

Andrew Dettmer [00:21:18] It’s going to make other Appalachian producers be a little bit more cautious in terms of bidding on these assets. And I think that is going to have a chilling effect on M&A there in terms of consolidation within the play.

Andrew Dettmer [00:21:29] Now, maybe it makes it opens an opportunity for somebody outside the basin to step in and buy some gas in kind of an off the wall idea that was out there before Pioneer was going to sell themselves to Exxon as the Pioneer would buy Range Resources. And as crazy as it sounds, we kind of liked it.

Andrew Dettmer [00:21:49] You know, we get back to what you and I were talking about at the beginning of this, that gas is maybe at a historical low right now that we’re never going to get once this LNG is on line. So if you’re in a well focused company, you have a delta and the commodity you’re selling versus gas that may never be there again, maybe it just kind of makes some sense for you to go out and buy a gas company or play a major gas asset. I don’t know how easy to sell that’s going to be to your investors.

David Blackmon [00:22:11] Right?

Andrew Dettmer [00:22:11] Yeah. Cimarex Cabot tried that a few years back and in the stock, at least when they initially announced the deal for call, they didn’t love it. But Cabot also was fairly well-known inventory, and there were some kind of asset specific issues there. So from a very like macro large level, we’ll take your perspective.

Andrew Dettmer [00:22:28] If the companies within Appalachia can’t consolidate these assets because FTC is going to stop them from owning too much, maybe if you’re an inventory constrained mid-cap oil producer in the Permian and you can’t afford to go add more Permian locations, you just kind of pull a wild card and go buy some gas. Cheap right now.

David Blackmon [00:22:47] Would certainly be a change in direction, wouldn’t it?

Andrew Dettmer [00:22:49] I mean, everybody.

David Blackmon [00:22:51] Became a pure play. And that’s.

Andrew Dettmer [00:22:53] Right. I’ve written a riff that is kind of off the wall of deals to write about. Yeah, it’s not my not my company that’s on the line.

David Blackmon [00:23:02] You know, we mentioned Diamondback a little earlier with the smallish deal they did. And, you know, I mean, over the years you see a company divesting their non-core assets like that and you think, oh, well, maybe they’re setting themselves up to be as a takeover target.

David Blackmon [00:23:17] You know, Diamondback is an amazing success story as far as I’m concerned. I just and Travis Tice is an old Burlington Resources guy like me. I’ve just been really gratified to watch how well he’s done out there with that company. But, I mean, do you think that. diamond back could be a potential merger target here for one of the super majors here in the coming years.

Andrew Dettmer [00:23:41] Yeah, If I was to buy Diamond, I could only do with the the writer in there that size. And the team has to stay on board to take over. Yeah. Yes, that’s true. So I think maybe it makes sense in that way if you get the management team with it. But I wouldn’t want to see Diamond Bell.

David Blackmon [00:23:54] Excellence done that before, you know?

Andrew Dettmer [00:23:55] Yeah, that’s right. The area along those lines right where they ended up. So that would definitely be one way. Right. Like you, you’re struggling. Your operations, not the kind of things that are but starting your operations in the Permian.

Andrew Dettmer [00:24:07] If you could get Diamond back assets in that team, which, like you said, does absolutely phenomenal job, you know, you could certainly do something like that. But yeah, I would put Diamond back fairly low, probably on the list of potential acquisition targets just because of how great that team does, how much confidence they rightly have, how good their assets are.

Andrew Dettmer [00:24:27] I mean, if, you know, Exxon or Chevron knocks on your door and offers you just a huge pile of money, you do what’s best for shareholders. But I’d like to see Diamondback continue to consolidate the basin and and, you know, be a major player going forward, a bit like Permian Resources.

Andrew Dettmer [00:24:41] Over on the Delaware side, there are smaller company in a real young management team that came up through Colgate. They got a hold of a public company when they did the reverse merger with Centennial.

Andrew Dettmer [00:24:50] But yeah, had a fantastic quarter last quarter really hitting on all cylinders in terms of operations. Another one that we’d like to see potentially continue to be an acquirer and roll up more of that basin and more assets under the control just in terms of being an efficient developer and doing a good job.

David Blackmon [00:25:09] So I talked to a fella, interviewed him, Oh gosh, I’m going to forget his name. Now. He’s a CEO at Civitas Resources up there and in and DJ Base. And he, you know, his line this was three years ago and he said, you know, as I look out the future,.

David Blackmon [00:25:26] I would like to see a situation where there’s only a dozen or so shale operators in the United States. I mean, he’s talking about consolidation to that level with trust laws, though, You know, I just wonder if that’s even possible, particularly in the current environment with the current administration in place. I’m not sure you can get consolidated that much, can you?

Andrew Dettmer [00:25:51] Yeah, it’s a great question. I don’t have an answer to it. I don’t think anyone really does outside of the FTC. And they’re not going to tell you. They don’t.

David Blackmon [00:25:58] Know. I don’t think they are.

Andrew Dettmer [00:26:00] You don’t know it when they see it. I agree with the sentiment. Right. That’s kind of what you and I were talking about earlier, that we just don’t need as many midcaps as we have right now.

Andrew Dettmer [00:26:09] These companies consolidate within each other, potentially consolidate some of the large caps. And I think that ties back to what we’re talking about expeditiously, going after a pioneer level company that at the end of the day, I mean, Shell came online.

Andrew Dettmer [00:26:23] It was fantastic resource as any new business is when it first comes out. You have lots of teams looking to exploit it. Figuring it out spawns a whole raft of small companies just like, say, the Internet did in the 1990s.

Andrew Dettmer [00:26:38] As it matures, you know, you shift more towards a cash flow model where we’re at now and it slowly consolidates into the largest and best managed operators and companies.

Andrew Dettmer [00:26:47] So I think oil and gas sometimes out know late 2020s is going to look a lot more like it did pre shale than what we’re used to over the last decade or so, where you have a handful of big companies that control most of the core resource control things like the Permian, you know, the Haynesville, Appalachia, to the extent the antitrust will let them do that.

Andrew Dettmer [00:27:07] And then you’ll have scattered private companies kind of focused on their more off-the-wall type opportunities San Juan Rockies, gas, Mid-Continent, get Texas Panhandle type stuff. So yeah, I think I think that is where we’re headed. That’s where we should head. I would say that you shouldn’t have antitrust concerns.

Andrew Dettmer [00:27:26] I mean, consolidating something like the Permian or the Eagle Ford, that’s an oil play. I mean, it just has very different dynamics that have been at the least. Shall we kind of get control of the local gas market? But then, you know, never say never in terms of where antitrust is going to end up? Well.

David Blackmon [00:27:43] It sure is going to be interesting to watch it all play out. I hope I get to live long enough to see it. But I will tell my viewers and listeners, nobody does a better job of covering the M&A space than Andrew does and embarrass. And that’s why I’m always interested in talking to you guys when you put out these reports and really appreciate your time. These half hours go so fast. It’s incredible. And and I guess with that, we’re going to have to wrap up. Man. Thank you. Appreciate it.

Andrew Dettmer [00:28:14] Yeah, I appreciate you having me on. Always a pleasure. Great questions and fun to talk to somebody else that is well-informed and likes the space as much as I do So.

David Blackmon [00:28:21] Well, I’m an oil and gas nerd just like you are.

Andrew Dettmer [00:28:25] Enjoy the conversations and I look forward to the next one.

David Blackmon [00:28:28] All right. Thanks and thank you, everybody. Thanks to the Sandstone group for. Host in our show and to our extraordinary producer, producer Eric Burrell. I’m David Blackmon. And that’s all for now.

 

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