Over the past week, we've seen one oil patch transaction tank, and another sail through. Let's have a look at each, and see if we can suss out the pace of future deals in the space.
Antero Resources, like Chief Oil & Gas, is a private equity-backed player that was early into the Barnett Shale play. Whereas Chief sold out to Devon Energy (NYSE: DVN) before moving on to other unconventional plays, Antero sold its stake to XTO Energy (NYSE: XTO) before pulling up stakes.
Both companies have since moved into Appalachia's Marcellus shale, where Chesapeake Energy (NYSE: CHK) is seeking a dance partner. Antero had agreed to acquire 205,000 net acres from Dominion (NYSE: D) at the end of the second quarter, for north of $550 million. But that deal got clipped this week to just 114,000 acres, with Dominion citing "Antero's difficulty in obtaining follow-on financing in the current market turmoil."
Broader jitters aside, it couldn't have helped that one of Antero's backers was the merchant banking division of Lehman Brothers.
Now, contrast this funding faux pas with yesterday's announcement by Delta Petroleum (Nasdaq: DPTR). The Rockies player is adding to one of its frontier resource plays by grabbing EnCana's (NYSE: ECA) acreage in the Columbia River Basin (CRB) of the Pacific Northwest. These two companies go back a ways, with Delta having farmed into some of EnCana's extensive Piceance play back in 2007.
Trust is one critical component of this agreement. A second is the pile of cash injected into this firm by Kirk Kerkorian at the outset of the year. A third is the fact that Delta is simultaneously selling a 50% interest in all of its CRB acreage to a yet-unnamed Canadian partner. Much like Chesapeake's successful joint venture strategy with BP and Plains Exploration & Production (NYSE: PXP), the inherent risk reduction has definite appeal in this tumultuous environment.
If we can glean anything from these examples -- beyond the old saw that "cash is king" -- I think we can also conclude that partnerships are powerful. I'm looking forward to many more joint venture arrangements, in addition to classic takeover bids by cash-rich competitors.
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