Baker Hughes onshore rig count was down 3 w/w to 733 rigs.  The rig count is down 34 rigs from the 2022 high in November of 767 rigs.


WSJ-Saudi Arabia-Led Oil Cuts Run Into Gusher of Alternative Supplies- Link

WSJ- Exxon Mobil Eyes Potential Megadeal With Shale Driller Pioneer   Link

FT- Opec’s gamble: can the global economy cope with higher oil prices? Link

WSJ- Paul Singer, the Man Who Saw the Economic Crises Coming- Link


DEP Update:  Quick personal note – we realized this week that last Sunday (4/2) was DEP’s three-year anniversary.  Time flies when you are having fun while old age means we sometimes forget important dates!  We are, of course, very thankful to all of you for your continued support and we hope you find value in what we do at DEP.  With respect to upcoming events/trips, the DEP Houston golf outing is tomorrow morning.  We expect ~72 golfers.  The following week we return to Midland and will host another reception (4/19) as well as cook for the Bynum kids (4/20).  As BBQ is a preferred DEP delicacy, we’ll cook again for friends in Houston on Monday, May 1st for our annual OTC BBQ and cook the following week (5/9) for the Merit Advisors Barrels & Clays event in Gainesville.  Lastly, we are attaching the working agenda for our Telluride Executive Series which will be held on June 27-29th.  This is one of several smaller, more intimate DEP events in which we discuss current industry trends as well as set aside time for networking and other fun activities.  We’ll do a similar event in Pebble Beach on August 29-31st while we are working diligently on a new conference idea – the DEP Supply Chain Forum.  Several high quality E&P companies have asked us to lead this effort.  The working plan is a conference on November 8-9th which is open only to supply chain/procurement executives.  We have quotes at Las Colinas and are awaiting quotes from Barton Creek as well as Hyatt Lost Pines.  A quick testing-the-waters with a basket of E&P contacts this past Wednesday/Thursday indicates strong interest in this event, so once we figure out how to pay for it, we’ll move forward.  Stay tuned.




E&P M&A Continues.  Not a shocker but Black Swan Oil & Gas, Piedra Resources and PetroLegacy Energy were collectively sold to OVV for $4.3B.  Speculation regarding the eventual sale of several PE-backed enterprises has been widespread in recent months, so this transaction confirms field speculation. Interestingly, in the media this week were two reports highlighting the potential for additional transactions.  Specifically, a Reuters article called out the possibility that one leading Houston PE-firm could unload two portfolio companies for potentially $3B while another Reuters article speculated another leading PE-firm is preparing to unload two of its portfolio companies for potentially $7B.  Time will tell which, if any, of these deals happen, but it’s worth remembering that lower activity post-close is an implication of these transactions. A case in point, OVV announced it will drop rigs following the close of the transaction.  Specifically, the combined rig count of these three enterprises is seven rigs, but OVV will take that count down to two rigs.  Meanwhile, the four E&P companies named in the Reuters article collectively run, we believe, eleven rigs today.  The question is what will they run post-transaction should that occur?  Or bet is less and that should worry our OFS friends as the call on services will decline, all else being equal.  Further, the concentration of buying power into the hands of fewer companies will increase.  It’s the same playbook the OFS sector has pursued recently with its consolidation focus.  Now, are these deals the end of the world for OFS?  Hardly.  New companies will be created.  In fact, we have several examples of E&P’s who flipped and have returned and/or are planning to return to the business.  In keeping with tradition, we won’t name names, but there are two teams from companies who sold within the past twelve months who are actively looking to build a new position and each hope to add one rig by the end of the year.  That’s a good thing, but it’s worth noting the time lag between sale and picking up activity is quarters, not weeks.  In between sale and newco formation is white space, particularly in an era of capital discipline where “the budget is the budget”.  So, our sense is near-term M&A will be pronounced, particularly as PE players exit long-term hold positions, thus some potentially choppiness with respect to 2H activity.  However, in the longer-term term, new companies will form, particularly as capital returns to energy.  Thus, the cycle repeats itself as it has in the past.


Oklahoma Recap.  Spent two days in the OKC/Tulsa area visiting with contacts and hosting a small group dinner.  Hard to say any major revelations were forthcoming as commentary gleaned from our discussions validated themes we’ve addressed in recent notes.  E&P contacts report growing inbound calls from service providers while some service contacts acknowledge recent price concessions.  One meeting which we found particularly interesting centered around technology investments which are driving greater uptime on producing wells and reducing costs associated with ESPs.  Notably, the use of AI to better monitor ESP performance, including estimating preventative maintenance, is driving better well productivity.  Moreover, the investments also help reduce LOE as proactive repairs and/or catching potential failures before they happen helps to reduce costs.  In addition, technology improves planning as field technicians can better identify which wells to address first.  In other words, imagine better mapping and ranking of well priorities.  For a non-IT proficient person, the investments and operational improvements are intriguing.  Furthermore, on our trip we visited an E&P company who recently picked up an electric fleet.  As expected, fleet performance relative to the prior fleet is better – both in terms of stages/day and reduced fuel expense.


Frac Facility Tour.  Spent one morning touring a frac / CT repair and newbuild facility.  The highlight of the trip was a quick review of a new frac engine which is undergoing testing on the stand but will soon deploy to a nearby basin for field-testing with a leading frac company.  The engine is from an established engine manufacturer, albeit one who does not presently target the traditional frac market.  This engine offers dual-fuel capability and is Tier 4 rated.  Should the new design work, it opens the door for a potential new engine supplier.  Also of note, the company will soon start building new frac trailers.  Presently, much of the company’s existing work is equipment rebuilds with many of the projects today tied to CT and cementing.   What was evident from the tour is the growing need for even more equipment maintenance and upgrades, not a shocker as lots of folks write and speak to attrition, but seeing in person is always a friendly reminder why OFS margins need to be sufficiently robust so as to allow for proper equipment reinvestment.  Our discussions confirmed that much of the current newbuild orders – whether it be for CT, cementing and/frac, are tied to existing companies seeking to rebuild/replace.  There is minimal inbounds from new start-up’s.


OVV Deal Takeaways:  OVV made some big moves, divesting its Bakken assets for $0.83B (2 rig program) and purchasing the Midland Basin holdings of EnCap’s Black Swan Oil & Gas, PetroLegacy Energy, and Piedra Resources for $4.275B ($3.125B cash and 32.6mm shares).  OVV believes the price paid represents 2.8x next-12-month EBITDA. The deal will add 75 MBOE/d (~80% oil), 65k acres, and 1,050 10K’ net locations.  Current operations have 7 rigs and 3 crews (bringing OVV total to 10 in the Permian) but will fall to 2 rigs (5 total OVV Permian) by Q4.  We believe a frac crew could be dropped too. Guidance for both production and capex have changed as a result, with production now expected at 520-545 MBOE/d (185-195 MBO/d), up from 500-525 MBOE/d (165-175 MBO/d). Capex is now expected at $2.6-$2.9B, up from $2.15-$2.35B.  With rig reductions by YE, run-rate capex will likely be $2.1-$2.5B in 2024.


XOM may be in the market according to The Wall Street Journal on Friday.  The WSJ reports XOM has been in preliminary talks to acquire PXD, whose $49B market cap would make it the largest oil & gas deal in a long time, if true.  Who knows, but the theme of consolidation is broad-based.  The article further states the oil major may also be in discussions with another potential target as well.  Again, who knows, but seems reasonable.  XOM released an 8K highlighting earnings impacts since Q4.  Liquids and natural-gas price declines will cost its upstream business $0.6-$1B and $0.4-$0.8B, respectively, in Q1.  The sequential hit amounts to 12-22% in total.


RPC, Inc. – Share Buyback:  RES announced it repurchased 1.1M shares for in Q1 for $9M.  This represents about 0.5% of fully-diluted shares outstanding.


BKR U.S. Land Rig Count: Declined 3 rigs to 733 rigs this week.


Refining Observations:  Weekly data suggests strong demand for gasoline, distillates, and jet fuel (see below), but margins receded as crude surged on the OPEC+ cut announcement.  Even so, Q1 margins came in strong, and Q2 is off to a good start (albeit one week of data and well below last year’s averages).  For refiners who weren’t affected by volume losses from turnarounds, Q1 should be a strong showing.  Exxon’s 8K called out very modest impacts from sequential margin changes for its refining segment, which includes both US and international assets.


As always, this and any other DEP note should not be considered investment advice….it’s just our random thoughts on the industry and we are sometimes wrong.


John M. Daniel

Managing Partner, Founder

Daniel Energy Partners, LLC




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Daniel Energy Partners is pleased to announce the publication of its first market research note. In this note, we reached out to executives across the oil service and E&P sectors to gauge leading edge sentiment.

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