Activity in RR Districts 1-6 is being colored by a new reality of ‘Lower for Longer’. Fewer wells are being drilled as companies try to shore up their balance sheets by saving cash as oil prices remain low and hedges come off. As I write this report, WTI is bouncing off its $40/bbl support level, Apache recently rejected Anadarko’s $18Bln offer, and Burleson LLP announced their firm is closing all of its offices by year-end. Out of all these developments, I believe the closing of Burleson LLP, one of the most prominent land and title law firms in the country, speaks volumes for the current job market and the opportunities available to landmen today. Burleson cites the main reason for closing was a decrease in the need for the firm’s land and title services as the rig count went from 1300 to 600. This same decline has also impacted landmen by shrinking the demand for runsheet preparation, abstracts, surface use agreements and curative work.
In other RR Districts 1-6 news, Alta Mesa sold its Eagle Ford holdings in Karnes County to EnerVest, and companies like SM Energy, Anadarko, Clayton Williams have packages on the market that contain properties in the Eagleford, Buda, Austin Chalk, Eaglebine and Cotton Valley trends.
During the first half of 2016, we anticipate an increase in deal flow due to low oil prices, and a few public companies with good balance sheets deciding to make strategic acquisitions. There are rumors about certain acquisitions that companies like Exxon, Chevron or Conoco might make in order to secure a better position in US shale plays. Private equity-backed companies will also contribute to the deal flow increase by acquiring assets from distressed companies. The spotlight will be on international companies looking at various opportunities to acquire interest in US shale assets but, after not faring well the first time around, these international firms will proceed slowly and cautiously for as they say, “once bitten, twice shy”. There will be new buyers to the table who I will refer to as the “New Chesapeake” and these new buyers will provide a refreshing approach on how to best develop and profit from the vast oil and gas reserves in the US. “New Chesapeake’s” success will be based on securing the best land with the most profitable resources. Companies with the best acreage will continue to be under-performers regardless of the technology and personnel.
So in the meantime, what does that mean for us, the landmen? The good news is that the majority of independent landmen are not burdened with a large overhead or the long term liabilities that a corporation typically carries. Instead independent landmen usually have an ultimate flexibility and can cut unnecessary expenses in order to live within their means. They have built an extensive network throughout their land career and have the ability to quickly connect with friends and business associates while looking for work. However, it is important to reevaluate the way you package yourself to your industry connections, especially in a market where you are competing with a large number of other job seekers. Each of us offers an incredibly unique skillset to an employer and it is wise to highlight this uniqueness when presenting yourself. Check out the AAPL website for a plethora of educational and networking opportunities at discounted prices. These opportunities will keep you ‘in-the-know’ and further increase your marketability. Remember, “land is the basis for all wealth” so keep those skills sharp and your connections fresh.
by Randy H. Nichols, CPL. This article was originally published in Landman 2, American Association of Professional Landmen (AAPL). Mr. Nichols has been writing the Field Report for AAPL, covering the Texas region, since 2012.