A&D Intelligence

Every E&P professional with a hand in business development should make reservations now to attend the information-saturated A&D - The Workshop and A&D Strategies & Opportunities conference in Dallas September 3-4 hosted by Hart Energy Publishing.

A&D Watch’s half-day tutorial, A&D - The Workshop on Sept. 3, is the must-attend event for every Business Development team. The workshop is a great primer by some of the industry’s crackerjack acquisition experts for those breaking into business development and those wanting to update their BD best practices.

A&D - The Workshop, sponsored by The Oil & Gas Asset Clearinghouse, is an overview of the upstream Business Development space for newcomer and veteran professionals on BD teams and firms that provide services to E&P A&D. Attendees will hear the Business Development 101 basics on current upstream M&A trends, reserve analysis, negotiating skills, networking, screening acquisition prospects, financing, due diligence, and tricks and traps.

Hear from the experts at A&D – The Workshop. Keep yourself and your BD team in the know and ahead of the competition! Learn more about the Sept. 3 A&D - The Workshop. Click here to register.

Following the workshop and now recognized as “the BEST A&D event in the Industry,” is Oil and Gas Investor’s 7^thA&D Strategies and Opportunities on Sept. 4. The all-day conference features industry players in the trenches offering up-to-the-minute updates and market trends and nuances that affect your dealmaking.

Last year’s event drew nearly 600 of your peers and asset competitors, and seating is limited. Don’t miss hearing about current asset market metrics, buying in shale plays, best practices and pre-emptive opportunities. Learn more about the Sept. 4 A&D Strategies and Opportunities Conference. Click here to register.

Both events will be held at the Fairmont Hotel in Dallas.

Be there. And look me up. I look forward to networking with the industry’s top players. So will you.

Chesapeake Energy Corp. has a knack for putting cash in the bank. From selling non-core assets to volumetric production payments to (proposed) master limited partnerships, the company is now selling a giant chunk of an undeveloped resource play. The fact that Plains Exploration & Production Co. is willing to pay $3.3 billion—half down now and half on the installment plan—for a 20% piece of the action on acreage in the Haynesville shale play suggests the hoped-for gasified gold under them Haynesville hills is more than just a lot of hot air.

The deal involves a 20% working interest in 550,000 Haynesville prospective acres both in northern Louisiana and East Texas for $1.65 billion. Beyond that Plains will fund half of all of Chesapeake’s costs on its remaining 80% share up to another $1.65 billion. In addition, Plains has first dibs on 20% of any more acreage Chesapeake gets in the play.

Chesapeake went to the alter and got married at the hip on its Haynesville operations in exchange for Plains’ up-front endowment payment.

Chesapeake’s CEO Aubrey McClendon suggests the deal values the total 550,000-acreage position at $16.5 billion, leaving Chesapeake with about a $13.2 billion piece.

The late-day breaking news kept the analysts up most of the night working out the details and implications. Calyon Securities’ Jeb Armstrong estimates the transaction equates to a per-unit basis to $30,000 per acre and $1.39-$2.67 per Mcfe of net unrisked reserves, which the companies postulated to be some 23-44 Tcfe.

Armstrong says the deal provides Chesapeake with a quick cash infusion. “While it still had ample liquidity available in its credit facility, the company may have been anticipating that by the end of Q2 it would have been able to raise $1 billion through the formation of an MLP and an additional $1.5 billion through the sale of its 85,000 net acres in the Woodford shale. The Woodford sale may still be in the works. However, spinning off an MLP right now would be extremely difficult. Since it had just tapped capital markets for almost $3 billion in equity and debt, selling a working interest in the Haynesville may have been the least worst way to get cash.”

At J.P. Morgan Research, Joe Allman calculates that Plains is paying $27,000 per acre, inclusive of the incremental $1.65 billion “promote” for drilling costs. Like Armstrong, he says the deal solves a short-term cash crunch for the big gas guys.

“Chesapeake’s aggressive buying of acreage in the Haynesville shale play and other spending apparently led CHK to a short-term cash crunch. Though CHK had to sell down an interest in its premium Haynesville asset, this JV transaction brings in $1.65B of cash, which satisfies CHK’s immediate cash needs. Assuming an additional $1B in cash from its planned midstream partnership, CHK should not need to seek capital from outside sources to fund its current development budget. We view this transaction as a significant financial improvement for CHK.”

Analysts at Tudor, Pickering, Holt & Co. Securities call the transaction a “transcendent moment” for the Haynesville play and pinpoint that Plains is paying some $30,000 per acre for “some of the play’s best acreage.” They suggest Plains paid full value on current metrics.

“Using the NPV of the $1.65B in drilling costs (assumed to be fully funded within 4 years) coupled with the upfront cash, PXP is effectively paying $3.03B for 110K net acres ($27.5K/acre). Under our Haynesville assumptions (50% acreage productive; 80-acre spacing; 6 Bcfe wells; $8/Mcf LT gas; $7MM well costs), PXP is paying NPV10 and is therefore betting on higher acreage productivity or gas prices. While we are not ready to change our underlying Haynesville assumptions, we must acknowledge PXP’s management team has an envious track record of buying/selling well.”

As the TPH gang succinctly puts it: “Giddy up!”

Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com

Got Haynesville and/or Bossier shale?, ask the analysts at Tudor, Pickering, Holt & Co. Securities Inc. ” You need some…  it’s very valuable.”

Seems nobody making well reports are quite sure about whether the Haynesville shale and the Bossier shale in northern Louisiana and East Texas are one and the same or different-just-stacked. Geologically speaking, they are separate formations married at the hip, but the Bossier may extend further west than does the possibly prolific Haynesville. Seems everybody’s quite sure that both are worth tapping.

Thus the coinage “Bossierville,” first put in print by the TPH team but who give credit to Core Labs at a technical presentation. TPH had more to say on the shale and the companies involved in it. Following are excerpts from their report:

“This is the real deal.  We’ve touched base with every public and private player we know and truly believe this play is indeed the next big thing.  Recent weeks have shown Haynesville mania in full force.  Some believe results from one well by PVA literally creating billions of equity value, but we believe the crescendo of impending well news makes the Haynesville the best place to invest for potential upside, near-term news, and step change value creation. 

“This is similar to what happened around the Barnett when EOG really highlighted that play back in 2004 and KWK, CRZO, etc…became fast followers. Best Haynesville/Bossier levered names: GDP, HK, XCO and GMXR. For catalyst-hungry investors, we strongly believe that HK and CHK will both have results out in next ~3-4 months and real upside remains for Haynesville-levered names.

The Haynesville shale is located between the deeper Haynesville lime/conglomerate and the shallower Bossier shale.  The Haynesville distinguishing characteristics are higher porosity, total organic content and deeper depth.  This combination leads to higher gas in place and we believe likely leads to higher “free gas” (vs. adsorbed gas) in the shale.  Higher pressure and free gas may be leading to the higher initial flow rates, higher sustained flow rates, and shallower long-term declines.  All these factors lead to our confidence in increasing our typical well profiles.

Typical well profiles: At this point [the report was published in mid-June], PVA is the only disclosed initial production (IP) rate of 8 mmcf/day (10-15 mmcf/d expected).  However, our industry moles have repeatedly confirmed rumors of IPs of 10-20+ mmcf/d suggesting EURs of 4-10 bcfe.  Previously, we were modeling EURs of 4 bcfe (gross), $7MM well costs, 80-acre spacing and assumed 1/3 of acreage was productive.  We now know those numbers are too conservative and as such are increasing our type curves.  Our new Bossierville type curve is a 6 bcfe gross EUR; 80-acre spacing; 50% of acreage works for $7MM well costs.  This methodology is consistent across every single company mentioned below. Over time there will be haves and have-less (probably some have-nots), but we honestly don’t know how to differentiate the companies… yet.

How to play? Lots of companies with acreage have not yet talked about the full extent of their Haynesville acreage, because it is simply too early to know the best drilling/completion recipe. Also adding acreage alone doesn’t create value, companies need to significantly accelerate rig count to create real asset value (watch the dayrates on 1500 hp rigs, big moves coming). The most levered names to the play include GDP, HK and GMXR with 50+% of their NAVs associated with Haynesville.  XCO has the “cheapest” multiples in the play and CHK owns the most acreage with 500k acres.

Companies: We previously assigned Haynesville value to CHK, HK, XCO, GDP, GMXR, STR. We are now rolling in value for APC, XTO, DVN and EP. For all companies, we are now assuming the 6 Bcfe typical well. A summary of our assumptions and valuation for each company follows:

GDP – We are increasing our NAV 56% to $80 for the company’s 66k net Haynesville acres.  In our modeling, Haynesville has ~415 locations developed over the next 13 years.  The total value of Haynesville to GDP is $45/share or 57% of the overall NAV.  This makes GDP the most levered of our coverage list to the Haynesville.   

GMXR – Tied with HK for second most levered name; Bossierville accounting for 50% of NAV.  NAV moves +$31 to $84.

HK – Second most levered name to Bossierville, accounting for 50% of HK’s NAV.  HK has talked publicly of 155k net acres in the play with goal of 300k net acres.  At this point, we believe their hard working landmen have taken them to ~200k net acres and we assume 50% of that acreage works.  Our NAV moves +$23 to $61.  Getting another 100k acres (per their plan) only moves value a couple bucks…d oubling rig count and accelerating the pace of development adds $20/share.

XCO – We are increasing our NAV 37% to $41 as our increased type curve adds $11/share. Haynesville valuation for XCO assumes 125k net acres (101k net announced), 50% of their acreage productive on 80-acre spacing, for ~780 locations developed over the next 12 years.  Haynesville represents 34% of XCO’s overall NAV.

CHK – We are increasing our NAV 16% to $101.  CHK has been the leader in the Haynesville and has quickly amassed 500k net acres.  Haynesville now accounts for 20% of CHK’s NAV.  As the Great American Land grab is nearly over (CHK at 500k goal), we believe CHK will begin announcing well results potentially as early as their Q2 call.  However, we believe meaningful well news/type curves will almost certainly be revealed at their first ever analyst day this fall.

EP – We are increasing our NAV $1.50/sh, or 8% to $27 as we roll in previously unassigned Haynesville value at our 6 bcfe typical well. Our Haynesville valuation for EP assumes 27k net acres, 50% of their acreage productive on 80-acre spacing, for 170 locations developed over the next 8 years.

STR – Yesterday we increased our NAV by $5.50/sh (to $79) for STR’s 30k acres of Haynesville potential.  Gut feel says risking their acreage by 50% too punitive as conservative company probably already heavily risking.

XTO – Following yesterday’s announcement, we are rolling in new value for the company’s 100K net Haynesville acres.  The Haynesville exposure increases the XTO NAV by $6/sh to $102 and represents 6% of XTO’s overall NAV. 

APC – We are increasing our NAV $7/sh to $104 as we roll in 100k net acres, 50% productive on 80-acre spacing, for 625 locations developed over the next 9 years.

DVN – DVN not talking about it yet, but without a doubt they are testing.  At this point, we are rolling in credit for their 137K net Carthage acreage (why wouldn’t Carthage have potential in the middle of the play?).  We have not giving credit for 190K net acres in East Texas that may be prime for “Bossierville” exposure.  Our NAV moves up $7 to $152, which could prove conservative as more acreage could be productive.

 Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com

It’s been said that one entrepreneurial-minded person founds a business on passion and drive, the second generation builds the business, the third generation works there because their family expects them to do so, and the fourth generation doesn’t know anything about the business and sells the “stock” their daddy and granddaddy owned.

In the case of the Hunt family fortune, the first great grandchild to legendary oilman H.L. Hunt—Albert Hill III—sued the caretakers of the fortune and found himself disinherited.

It’s a shame, because he could have been the annointed one had he positioned himself and not felt so entitled.

In Sydney Sheldon’s novel “Master of the Game,” a diamond empire is created through risk and malice and the daughter of the founder spends her entire life trying to groom an heir apparent with no success and great heartache. Such is the case with the Hunts.

Once considered the world’s richest man, Hunt Petroleum founder H.L. Hunt started by taking poker winnings some 80 years ago and betting them on an oil well. Since his death in 1974, his nephew Tom Hunt, now in his 80s, has run Hunt Petroleum and is the keeper of the family trusts that control the flow of wealth to the heirs.

First great grandson Al Hill III, now in his late 30s, could have been the prince-in-waiting had he played his cards right. Instead, he partied too hard in his trust-fund-supported youth and later became the family whistle-blower over perceived injustices and conflicts of interest within the family hierarchy. He is trying to have his uncle Tom removed as chairman and trustee.

Tom, once H.L.’s right-hand-man, whether innocent or guilty of such accusations, likely saw no heirs-in-waiting capable of captaining the family ship, and decided to sell the assets to Fort Worth neighbor XTO Energy and disperse the funds. Hunt heirs will get to participate in the upside by retaining 23 million shares of XTO as part of the deal.

Al III, unfortunately for him, lawsuited himself out of his piece of the fortune through his disinheritance.

Imagine what an MBA and BS in Petro Engineering might have gotten Al III. King in waiting for the family fortune. If you’ve got complaints about how the ship is being steered, it’s much more effective to be captain than pirate. He could have apprenticed his way to the top all these years and then had the control to correct any of the injustices he is now suing over.

Here’s my advice to Al III: Drop the lawsuit and the attitude and humbly ask forgiveness of the family. While it’s too late to save the heirloom assets (XTO Energy is going to get them regardless of the lawsuit), that action will save your piece of the proceeds and the monthly trust dividends. Then do what great granddad H.L. did—take your stake and bet it on a play (Haynesville, Muskwa, Marcellus, maybe even the Pierre sound like good odds). A new Hunt legacy could be yours to create.

Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com

Just when you thought XTO would take a breather with $4.3 bil in deals under its belt by mid ‘08, the gas company doubled its money with a big roll of the dice on the storied and legendary Dallas-based Hunt Petroleum Corp. for $4.186 billion. XTO president Bob Simpson is exuberant, calling the deal “a price that one could hardly believe.”

Simpson says he is projecting a robust $1.2 billion cash flow from the Hunt acquisition. “That’s unusual in my career to get that relative cash flow to purhase price for this kind of asset, where they’re legacy, long-lived, have phenomenol opportunities, and they fit like a glove with most of our operations. That’s an exceptional moment in time.”

The Fort Worth producer is gaining some 1.05 trillion cubic feet of gas equivalent in East Texas, Louisiana, the Gulf Coast, and interest in the North Sea. Pleasantly, it will pick up about 100,000 net acres just like that in the Haynesville play with 30,000 of those acres surrounding the recent successful Penn Virginia well that came on at 8 MMcf/d. “We should have three to four horizontals down by the end of the year,” says Simpson. With a closing anticipated in early September, they’re getting to it.

XTO will also gain 15,000 acres in the Bakken, adding to its $1-billion entry into the play just a few days prior to this announcement through its acquisition of Headington Oil, still pending.

The question remains whether XTO can get the deal to the closing table any time this decade.  Hunt Petroleum is the legacy of early 20th Century wildcatter H.L. Hunt and the company is mired in squabbling and an active lawsuit amongst the heirs and operators. Great grandson Al Hill III accuses the patriarchs of mismanagement, fraud and “dumping” the company to hide their high crimes.

XTO boss Simpson’s excitement may lend some credibility to the claim. As XTO will pay $2.6 billion in cash and the rest in stock, Hunt heirs will get to participate in the upside as XTO turns the assets from dividend producing to growth oriented. Says Simpson, “We’ll join hands with (the Hunt family). We’re proud to have them joining us.”

Just don’t invite them to dinner.

 For a detailed account of the Hunt saga, see D Magazine’s article here.

Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com

Cabot Oil & Gas’ $603 million bolt-on acquisition surrounding its East Texas Minden Field is “a little uncharacteristic” for Cabot, says president and CEO Dan Dinges, considering it hasn’t done a deal in seven years. “Cabot is not very active in the M&A space,” he notes.

But the proximity to Minden and the Haynesville/Bossier fruit was just too juicy not to reach out and grab. So it did, gaining an additional 24,250 net acres (some contiguous), an extra 32 MMcfe/d and some 176 Bcfe proved reserves—none of which are attributed to the deeper formations. “That’s upside,” says Dinges.

Cabot is experienced in Minden, located in Rusk and Panola counties, having drilled 77 wells since 2003, all successful. Drilled to the Cotton Valley trend, the wells average 1.2-1.4 Bcfe per well. Since, the company has deepened 11 of those wells and were successful in eight at a cost of an extra $200,000 to $400,000 per well and gaining an incremental 0.2 to 1.5 Bcfe in reserves.

Of the acquired acreage, 80% remains undeveloped on the shallower formations. 100% is undeveloped deeper. Cabot has identified 400 drilling locations on 40-acre spacing with plans to downspace to 20. Dinges believes an additional 80-90 Bcfe of reserves lie in the PUDs. He says, “We have a lot of confidence in those probable reserves due to our 100% success rate in similar wells in Minden.” He suggests to expect a much higher upside than was used in the company’s analysis 

Cabot has four rigs running at Minden and plans to add another in 2009. Thus far all wells have been vertical with one Haynesville online for three months. It’s initial production rate was 2.3 MMcf/d, now producing 750,000 daily. Cabot is gearing up to test horizontal and expects the majority of its future wells will be horizontal drilled to the Haynesville.

J.P. Morgan Securities Inc. analyst Ronny Eisemann makes this evaluation of the deal:

“If we value the acquired proved reserves at $2/Mcfe, the 176 Bcfe of proved reserves are worth just above $350MM. After deducting the $350MM value of the proved reserves and the $26MM infrastructure from the $603MM acquisition price, it appears Cabot is paying around $225MM for the Haynesville and for any unbooked potential in other formations. Thus, it seems COG is paying more than $9,000 for the Haynesville acreage. This value is in line with and lower than some of the values we are hearing about for Haynesville acreage. If the Haynesville works on all of this acreage and yields 4 Bcfe wells for $6MM, the value of the Haynesville potential alone could be more than $700MM (using $7.50 gas and assuming 80-acre spacing).

“In fact, the value that COG is paying implies that only 27% of the acreage will work for the Haynesville. If the wells yield 5 Bcfe/well, the value could be more than $1B. 

“The acquisition metrics look fine. COG paid total price/proved reserves of $3.43/Mcfe or, deducting the $26 MM value of the infrastructure, COG paid $3.28/Mcfe. On a ‘flowing barrel’ basis, COG paid over $18,800/Mcfe. For comparison, Cabot is trading at $3.70/Mcfe of proved reserves and the group is trading at around $4.25/Mcfe. On a production basis, COG trades at over $22,000/Mcfepd and the group trades over $16,000/Mcfepd.”

Says Dinges: “It’s a nice place to have a reason to drill a well.”

Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com

XTO Energy is on fire in the acquisitions market this year, surmounting a company record of $4 billion annually on acquisitions with $4.3 billion to date in 2008—before the end of May. 

XTO has grabbed up assets scattered across the U.S. in several sizeable deals this year, including a recent one from Linn Energy introducing them to the Marcellus shale, but company execs seem particularly pleased with their most recent one, an initial foray into the Bakken play.

Company president Keith Hutton says, “We’re very excited about this. It’s one of the few acquisitions ever where you’ll hear us say we expect a 12-15% annual growth with a third of the cash flow. That’s a pretty phenonomenal build.”

The Fort Worth producer is paying $1.85 billion for 352,000 net acres (215,000 undeveloped) in the Bar Trend and Nesson Anticline in Montana and North Dakota, picking up producing properties in Elm Coulee Field in Montana. XTO estimates the proved reserves at 68 million barrels of oil equivalent (60% proved developed), but is clear that they think they are being way conservative. Production tops 10,000 BOE/d, mostly oil, which they think they can double in five years.

Says Hutton, “We’ve been watching the Bakken for a long time but didn’t see a position to get into Elm-Coulee with upside toward the Nesson anticline. This deal set us up for that.”

CEO Bob Simpson points to being able to grow production at up to 15% per year for about a third of cash flow at the current strip price as the “sleeper” point of the deal.  ”That’s an unusual thing,” he says. Additionally, at the current strip, the acquisition is about four times cash flow, which is “some really good news to enter a basin at that kind of price.”

Normally to get into a new area you have to pay a “franchise” fee, he says. “We bought it on great economics.” And as the production is already 50% hedged and will be 100% incrementally, Simpson gloats that the deal is a cash cow. “In 30 months (hedged) we’ll get more than half our money back.”

Similar to the BreitBurn-Quicksilver deal last year, Dallas-based seller Headington Oil is taking close to half of the purchase price in equity, giving XTO the opportunity to pay more for the assets without coming out of pocket for the whole wad, and exposing the little private company to half the upside as XTO moves forward drilling out the undeveloped acreage and infilling on the developed. XTO has ramped up from two rigs running to four on the acreage, and plans up to eight by the end of 2009.

Headington, interestly, began buying up acreage in the region back in 2000 after hiring college students to count tanker trucks hauling oil from a Halliburton experimental horizontal well. The students should have taken equity in pay rather than cash.

Map of XTO-Headington deal assets: XTO Bakken Presentation

Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com

When Encore Acquisition Co. announced it was seeking strategic alternatives including the possible sale or merger of the company with juicy assets in the Bakken, Haynesville, Williston and Arkoma plays, not all analysts believed they were acting from point zero in the acquisitions game. One believes there is a 50% chance the company already has a bid on the table and is looking to maximize the offer.

Tudor Pickering Holt & Co. reported the announcement was a “big surprise” given the company’s 92% rise in value year to date. “Typically this type of announcement comes when the stock is underperforming. If buyer’s emerge, then odds of an oil-driven frenzy go way up.”

Analyst Joseph Allman with JPMorgan Securities Inc. also deems the move “surprising,” “odd” and “out of nowhere…given the outperformance of the stock both this year and last year,” and that the move could be a response to an offer.

Says Allman, there is an “equal chance of the review being internally or externally generated. EAC could have generated the review idea itself out of frustration over what the company thinks is an undervalued stock price or to take advantage of an oil futures curve now in contango.

“On the other hand, something external like an unsolicited offer to buy EAC could have prompted this process. Given how well the stock has done this year and last, the management’s success in executing and telling the story, the suddenness of this announcement and recent moves in the crude futures curve, it appears equally likely that EAC wants to sell into a strong crude market or it received an unsolicited offer and wants to test the market.”

Encore holds 231 MMBOE proved in the Williston, Permian, Big Horn, Powder River, Paradox, Arkoma, Anadarko, North Louisiana Salt and East Texas Basins, including 10,000 acres overlaying the Haynesville discovery.

Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com

Does a farmer determine the price he will receive when he sells his corn or wheat or soybeans to the market? Does a dairy farmer make the call as to the value of his milk? Does a silver miner set the price of a bracelet? Do orange growers tell grocers what to charge for a carton of OJ? Of course not. Their profits rise or fall based on the confidence of buyers and sellers of commodities responding to the open and free markets.

So why does the Senate parade oil-producing executives in front of a firing squad of irate, hauty law-making questioners and demand to know what they are going to do about high gasoline prices?

Doesn’t it make you want to shout, “Are you stupid?”

When Sen. Dick Durbin asks, “Does it trouble any of you when you see what you’re doing to us?,” does he think we don’t understand the price of a barrel of oil is directly affected by a supply that is ever harder and more costly to suck out of the ground, and that is locked up by nationalistic countries protecting their own supplies, and that is limited by the very legislators haranguing them who make off limits 85% of the U.S.’s own outer continental shelf?

When Sen. Herb Kohl says, “Even when prices at the pump go crazy, you have no problem in keeping up with your own increasing profit,” does he think we don’t know that demand is ever burgeoning with huge energy markets like China and India hungry for more, and that no marketable, economical, viable alternatives yet exist for powering the world’s vehicles?

When Sen. Patrick Leahy suggests, “Prices should not skyrocket like this in a functioning, competitive market,” does he think we don’t get that a tight supply and voracious demand leave little margin for error, and that every time a Nigerian rebel shoots onto a rig, or a Middle Eastern or Latin American pissant dictator shoots off his mouth, or a storm brews in the Gulf of Mexico, the fear of less spikes the price?

“Where is the corporate conscience?” asks Durbin. Are you stupid?

Maybe the august senators need look no further than their own Federal Reserve chairman to find the answer to why the price of a barrel of oil has doubled in a year. Concerned more about market liquidity than inflation in contrast to his predecessor Alan Greenspan, Ben Bernanke has responded to the sub-prime credit market meltdown by flooding the market with dollars. And what happens when you print funny money? The value of the dollar has plummeted on a global scale. So where we’re paying $130 for a barrel of oil, those paying in Euros or yen aren’t feeling the pain nearly as much.

Steve Forbes states, “Inflation accounts for at least half of the price of oil today.”

And as the dollar freefalls, the oil commodities market has experienced a tidal wave of institutional investors such as pension funds, hedge funds and endowments saturating the oil futures market—seen as a safe-haven for billions upon billions in long-term investors’ cash—that has accelerated the breath-taking climb in oil prices.

So the Senate grills major oil executives as if they’re the bad guys for making a profit for their shareholders, suggesting a windfall profits tax might be in order. How do you make U.S. A&D become just a big “D?” Try making the tax regime so greedy that a company can no longer make a profit doing business there. Just ask Alberta.

Oops. Are you stupid?

Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com

Of a selected 100 energy executives across the globe, 87 predict that M&A in the USA will match the hot pace of last year this year or even pick up the pace. That’s according to the “Energy M&A Forecast” commissioned by the 220 energy-focused lawyers at Fulbright & Jaworski.

The report covers trends globally and across all sectors of the energy industry, but has a strong emphasis on U.S. activity and one breakout for E&Ps.

In a nutshell, the U.S. accounts for about half of all M&A globally, amazingly, both in terms of transactions and deal values. The report suggests this is because of ample opportunity locally and ease of doing business stateside. In fact, more than half of the overall respondents rated doing business with governments outside of their home country as difficult. No word on PDVSA’s or Lukoil’s response. A scant 14% of U.S. respondents would even consider doing business beyond the domestic border.

Hardly anyone in the States are worried about record oil prices, with a giant majority expecting commodity prices to have no effect on M&A transactions are to even increase deal flow. Which leads to the No. 1 respondent-named obstacle to U.S. M&A—price expectation by the seller.

The primary driver for energy M&A is the cost of production/realizing the economies of scale, cited by 57%. Another 44% chose access to supply/oilfields, with 36% naming new markets.

Survey respondents are also expecting big deals to dominate, private equity to rise, and E&Ps to be most active among all energy subsectors.

For a look at the full report, click here: “Energy M&A Forecast”

Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com