Over the past 3 months, we have attended industry events where and heard from several capital providers in the energy space. While each event had a unique topic, a few themes became clear:
- Perfect deals - They are out there and investors will wait to find them. It's apparent there are still funds available, however, capital providers are far more cautious about how they put this to work. The flip side is they may spend too much time circling deals, waiting for various factors to align. I couldn't help detect a sense of paralysis by analysis amongst these firms.
- Management teams - "People pay you back, assets don't", was echoed by many investors and sums up they seem to be approaching new deals. While the assets may not be the best, the investors are playing a longer-term game and betting the management team is able to perform beyond expectations when the price hits $40+ (consensus appears to be late 2016).
- Narrowing buy-ask spread - It is fair to make parallels to the Texas real-estate market (mostly single family homes) where sellers still believe it is 2013-14 and list their homes at exorbitant prices. Buyers, on the other hand, know the market is cooling and refuse to pay. Hence, the home sits for 6 months without an offer. Reality is sinking in on both sides and the oil & gas M&A space appears to be no different.
- Flexible and creative with deal structures.
- Adapt quickly to changing market conditions.
- Not bound by glorious targets other than seeing a reasonable IRR and payback period.
- Focus on smaller deals forsaken by the rest of the market.
If you or your firm owns an oil & gas asset, please share what you have heard from capital providers as well as your experiences in dealing with them. Feel free to comment below or send us a message. Also, feel free to reach out if you would like be be matched with one of our buyers.