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Bakken's Tipping Point: Grayson Mill's Potential Fall After Chevron-Hess
02/08/2024
The Permian Basin, a big oil area, is not seeing as many deals as before because lots of companies have already joined together. Now, experts think these companies might start looking for new places to invest in the U.S.
One area getting attention is the Bakken play. Chevron Corp. has just made a big step there by buying Hess Corp. for $60 billion. Another company, Grayson Mill Energy, which got some help from a Houston investment firm EnCap Investments LP, might also be up for sale soon, worth about $5 billion.
“We think the $5 billion price tag referenced frankly looks steep and would peg fair value in the [$3.5 billion to $4.5 billion] range, depending on the net production level.”
- Capital One Securities analysts
Grayson Mill Energy entered the Bakken by purchasing assets from Equinor for $900 million in 2021. This purchase gave them a big area in North Dakota and Montana, where they began producing around 48,000 barrels of oil each day. Then, they bought additional land from Ovintiv for $825 million, which expanded area and boosted oil production.
Blog_Grayson Mill acquired Ovintiv's Bakken assets for $825M in 2024.png)
Even though it's hard to say exactly how much oil Grayson Mill is getting out of the ground now, some guesses are between 80,000 and 100,000 barrels a day (mostly oil).
EnCap, the investment firm behind Grayson Mill, hasn't shared much about selling the company. However, Jason DeLorenzo from EnCap hinted in an interview that they might be thinking about selling Grayson Mill or other companies they own in the next year or two.
Chord's Potential Acquisition of Grayson Mill
“What we can say generally is that we remain open to opportunities that will add value to our portfolio,” Chord said in a statement.
Grayson Mill Energy stands out as a top performer in the Bakken oil region, only second to Enerplus Corp in oil production per foot, based on a report using data from Enverus Intelligence Research by J.P. Morgan. This places Grayson Mill higher than other big names like Marathon Oil Corp., Hess Corp., Chord Energy, and Continental Resources in terms of productivity.
If Grayson Mill decides to sell, Chord Energy could be a strong candidate to buy it. Chord Energy came about from merging Whiting Petroleum and Oasis Petroleum in 2022, and it has been selling off smaller parts of its business to focus more on the Williston Basin, where the Bakken is.
Chord Energy and Grayson Mill have a lot of operations in the same area, and Chord is interested in expanding its presence in the Bakken, which makes the idea of Chord buying Grayson Mill quite logical.
However, the suggested sale price of around $5 billion might be more than Chord is ready to pay unless they can negotiate a much lower price. With a solid financial situation and very little debt, Chord could potentially finance a big part of this purchase using cash and borrowing, and might even offer some of its stock to keep the financials balanced, aiming for a debt ratio of about 1.5 times.
Chord's approach would likely focus on buying at a value close to what the already producing oil fields are worth, hoping to make more money from the assets through advanced drilling techniques and rising oil prices.
Bakken Neighbors Update
Right next to Grayson Mill Energy in the Bakken, big oil companies like Exxon Mobil (with its XTO Energy group) and ConocoPhillips are working too.
Blog_Exxon Mobil and ConocoPhillips in the Bakken; Chevron joins by acquiring Hess.png){kind=icon}
Chevron just bought Hess Corp, adding about 190,000 barrels of oil a day in the Bakken.
Also, companies like Marathon Oil, Continental Resources, and Enerplus are big players here, producing a lot of oil.
Blog_Continental Resources, Marathon Oil, and Enerplus in the Bakken.png)
Towards the end of 2023, companies spent $144 billion on deals to get more drilling spots. The whole year saw deals worth $192 billion.
About Grayson Mill Energy
Grayson Mill Energy, founded in 2016 by EnCap Investments and its management, has become a leading privately held Bakken shale-focused oil and gas producer. The company operates extensively in the Bakken region across North Dakota and Montana, with additional assets in Wyoming's Powder River Basin. Its expansion has been significantly driven by strategic acquisitions, notably from Equinor and Ovintiv.
About Chevron Corp
Chevron Corporation stands as a global powerhouse in the integrated energy industry, engaging in oil, gas, and geothermal sectors through exploration, production, refining, marketing, and chemical manufacturing. Renowned for prioritizing safety, environmental stewardship, and community relations, Chevron operates on several continents, focusing on innovation and operational efficiency.
About Hess Corp
Hess Corporation is an independent energy company with a global presence, dedicated to the exploration and production of crude oil and natural gas. It strategically focuses on key growth areas, including the United States, Guyana, and the Malaysia/Thailand Joint Development Area. Hess's involvement in midstream operations enhances its presence in the Bakken Formation in North Dakota.
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