STREVIG: COMPETITION FOR U.S. RESERVES STILL STRONG

Competition for quality U.S. oil and gas reserves remains strong.

Despite sagging crude oil prices, the median value of U.S. oil and gas reserves increased to $4.32/bbl of oil equivalent (BOE) in first quarter 1994 from $4.13/BOE in fourth quarter 1993, said investment banker Strevig & Associates, Houston.

Value was buoyed by natural gas, which for the fifth consecutive quarter proved to be the fuel of choice in reserve transactions, Strevig said.

TRANSACTION ANALYSIS

Strevig's median reserves value is derived from a total of 49 first quarter transactions, down from the 70 transactions conducted in fourth quarter 1993.

Transaction values totaled $1.12 billion in first quarter this year, up from $932 million in fourth quarter 1993.

Strevig noted the decline in transactions and increased value is not unusual for a first quarter as the market experienced the same effect in first quarter 1993.

In first quarter 1994, one transaction represented about 41% of the dollar value transacted. Seven deals valued at $20-200 million made up 49% of the dollar volume, but deals valued at less than $20 million made up about 78% of the total transactions.

First quarter reserves values continued to favor sellers of oil and gas, Strevig said, with prices paid for reserves averaging 39.7% of wellhead prices. Strevig said it marks the third consecutive quarter favoring sellers of oil and gas leases over buyers.

Independent companies dominated reserves acquisitions, with 40% of the transactions being an acquisition or merger that strengthened an independent's position in a particular area.

Strevig noted major oil companies were not as active in first quarter this year as in fourth quarter last year, but several are exploring property swaps.

GAS DOMINANCE

Natural gas transactions accounted for 68.6% of the number of deals conducted in first quarter 1994 and for 82.7% of the reserves traded.

Strevig said it is the first time that gas reserves as a percentage of total reserves traded exceeded the 70% mark.

And natural gas reserve purchases were the support behind the median price increase.

In deals where natural gas accounted for more than 50% of the reserves, the median price was $4.50/BOE compared with $3.86/BOE in deals dominated by oil reserves.

Significant deals completed in first quarter 1994 include:

Union Pacific Resources Corp., Fort Worth, purchased Amax Oil & Gas Inc., Houston, for $725 million (OGJ, Mar. 7, p. 40). The gas dominated deal included gas leases, three gas processing plants, and 550 miles of gas gathering tines.
Cabot Oil & Gas Corp. purchased Washington Energy Resources Co., Seattle, for $180 million (OGJ Mar. 7, p. 40).
Meridian Oil Production Inc., Houston, acquired the nonoperated interests of Parker & Parsley Petroleum Co., Midland, Tex., in the San Juan basin of New Mexico and Colorado for about $44 million (OGJ, Jan. 31, p. 43).
Bridge Oil (U.S.A.) Inc., Dallas, purchased most of the Anadarko basin and Rocky Mountain assets of Santa Fe Energy Resources Inc., Houston, for $51 million before adjustments (OGJ, Apr. 18, p. 36).

Strevig said possible future deals include a merger of Devon Energy Corp., Oklahoma City, with Alta Energy Corp., Denver; a merger of Alexander Energy Corp., Oklahoma City, and American Natural Energy Corp.; sale of reserves by Oryx Energy Co., Dallas; sale of Patrick Petroleum Co., Jackson, Mich.; and sale of Falcon Oil & Gas Co. Inc., Houston.