Energy companies are again looking for things to buy. Dealmakers have shrugged off Britain, shocking Brexit vote to exit European Union and have again resumed the purchase of gas and oil fields in both United States and Canada. They are busy in retsocking inventories. They hold the opinion that there has been an ending in the steadily decreasing oil price. According to Bobby Tudor, the Chief Executive of the oil invesment bank, Tudor, Pickering, Holt & Co., buyers are now more and more confident that the oil price has become stable and will slowly increase in the near future.
Price of oil has been held steady at or higher than $45 per barrel for most days in July and June. The current 2016 high is $51, a price seen prior to the British referendum. Crude oil went up 83 cents and touched the above mentioned price- more than 70 percent more compared to the February lows. A few oil company executives, however, were cautious about the future. When asked if the price of oil will touch $60 per barrel during the early days of 2017, nobody was willing to accept that bet. This cautious sentiment was seen across all companies.
The past is not encouraging. There was tumult at the beginning of 2016, with large capital spending cuts, accompanied by noticeable right sizing. The industry at present continues to focus on cost saving and repairing the finances. There are signs, however, that things have turned better than before. Sifting through Bloomberg data has revealed that Canadiuan energy companies have already collected approximately $15.5 billion in the form of equity finances during the first few months of 2016.
Quicker to the post
Diamondback Energy Inc., an United States oil producing company said during the second week of July that it will spend about $560 million in purchasing leases of oil rich land located in Southern Delaware Basin. This basin is situated with Permian Basin- a productive American oilfield. Initial production results from the Permian have been encouraging and the costs are getting lesser with time.
Laredo Petroleum Inc. soon followed Diamondback in buying acreage located in Midland Basin- another part of Permian. It spent $125 million on this purchase. Prior to the June 23 referendum, both sellers and buyers were comfortable with the thought that oil has jumped back from its 12 year lows. This conviction assisted the declogging of acquisition pipeline post a dormant period when deals offered did not materialize.