Managing Physical Records during Upstream Mergers and Acquisitions

Despite upstream mergers, acquisitions and divestitures sinking to a 20-year low in 2017, Christopher Sheehan, Director of Transaction Research at IHS Markit indicated a rebound is likely as M&A prices remain attractive when paralleled with organic reserve replacement costs. Demand remains strong for unconventional resources, particularly in North America, where the value of global upstream deals were dominated by the Permian, Appalachia and Rocky Mountain regions. In 2017, record setting deals for unconventional resources accounted for 50% of all global upstream deal value with $86 billion in resources changing hands. IHS Markit expects that North America in particular will continue to attract buyers seeking to improve positioning and acreage-building in today's lower-price environment.

Lysle Brinker, Director of Energy Equity Research at IHS Markit, stated that limited cash flows in the current oil price environment are forcing companies to continually evaluate, re-balance and modify existing portfolios as they face the challenge of maintaining, and potentially increasing, production in the decade ahead. Companies seek confidence in the face of fluctuating oil prices, uncertain forecasts, and North America and OPEC's supply management strategies. As market uncertainty diminishes and variables congeal, the demand for M&A increases.

While acquisitions can serve as an effective entry into promising plays, their value is closely tied to the play information such deals confer to the purchasing company. After spending years and considerable resources on exploration, companies generate priceless play information that is captured in maps, reports, surveys, notes and other documents. Yet these same companies often fail to maximize their information because they either poorly manage their documents or they impede access to the documents for their decision makers. Instead of exploring plays, their geoscientists spend their time shuffling through papers, trying to find the data they need to evaluate opportunities. An abundance of documents with no way to easily search and extract the data needed to analyze plays of interest is a common dilemma among companies that use acquisitions to source prospective play information.

The most important thing companies in this situation can do is ensure they have a robust records management solution to help transform this jumble of information into high-quality, searchable electronic and digital energy data. There is a great need to classify, image, catalogue and enrich each relevant map, report, well log, scout ticket, paper record and well log tape procured from acquisitions. Even further, having a subject matter expert to parse and triage all the physical assets to determine what items are of most value, is preferred.

The best end-result is to convert perishable paper records into secure electronic and digital assets for further analysis. While it is critical that M&A assets are scanned, enhanced, catalogued and quality-checked, the results also need to easily accessible. ESRI ArcGIS File Geodatabase allows asset teams to immediately start using the information to evaluate plays and generate prospects.

With the right plan in place, geoscientists can easily access newly catalogued and converted data to make quick, accurate exploration decisions that directly impact their bottom line. In a market where M&A activity continues, regardless of deal size, it is those companies that are prepared with a records management plan that will get into plays quicker, at lower costs and a quicker return-on-investment.

Learn more about our records management solutions for energy companies. You can also learn more about our companies and transactions research & analysis.

Levi Fisk is an Executive Director for IHS Markit's Data Logic Service that specializes in records management, turning critical data into information and insight.
Posted 10 July 2018

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.