The more than $25 billion in energy deals in just two days suggest there could be a whole lot more merger activity among companies looking to grab a bigger part of the shale oil and gas production business.
Kinder Morgan [KMI 28.19 
1.30 (+4.83%) 
]Sunday announced its acquisition of El Paso Corp [EP 24.45 4.86 (+24.81%) ] for $21.1 billion, a deal that would create the largest operator of natural gas pipelines in the U.S. The new company would have 67,000 miles of natural gas pipelines spanning the U.S. and reach every major natural gas production center. It would also take Kinder Morgan into Florida and connect Pennsylvania, Arkansas and Texas.
The second deal was Statoil’s $4.4 billion acquisition of Brigham Exploration[BEXP 36.75 6.39 (+21.05%) ], which has assets in the Bakken and Three Forks oil formations. They are estimated to have 300 million to 500 million of equity-based oil equivalents. Norwegian state-owned Statoil already has a stake with Chesapeake Energy in the Marcellus shale formation, centered in Pennsylvania. It also owns acreage in the Eagle Ford prospect in Texas with Talisman Energy.
“Marcellus is primarily dry gas, Eagle Ford is a combination of dry gas and liquids and this (Brigham) is oil. We now have a good deep position in the U.S. in unconventionals,” said Statoil Chief Executive Helge Lund, according to Reuters.
Daniel Yergin, chairman of IHS Cambridge Energy Research, Associates, said this type of deal activity is bound to continue, as the growth in shale oil and gas exploration and production was off the radar of many big industry players just several years ago. “These pioneers went into it a few years ago, when nobody was paying attention. It was thought to be a thing for independents, but it’s clear it’s a big resource play for majors who have the capital these developments require,” he said in an interview from Seattle Monday.
“We reached the high point in terms of (oil) imports in 2005. Sixty percent of our domestic consumption was net imports. Today, it’s down to 47 percent. Part of it is conservation, efficiency. A big part of it is increasing production. What we’re seeing is a reversal in what seemed to be an irreversible trend in terms of dependence on foreign oil. It shows what technology and innovation can do. It wasn’t in very many peoples’ play books several years ago,” he said
“Suddenly, U.S. oil production is up 10 percent since 2008. This is like a new burst of life in the U.S. upstream, and it’s driven by technology,” he said.
Yergin, also CNBC’s global energy analyst, is currently on tour with his new best-selling book, “The Quest: Energy, Security, and the Remaking of the Modern World.”
In his book, Yergin explores what he calls the “natural gas revolution,” which came with the breakthrough in horizontal drilling and hydraulic fracturing technology. For instance, the U.S. recovered just 1 percent of the natural gas supply from shale in the year 2000. It is now about 30 percent, and Yergin expects it to be 50 percent within the next several years.
While creating a boom, the so called “fracking” process is not without its critics. It has raised concerns about water contamination, a topic Yergin also discusses in the book.
The El Paso deal was clearly spurred by the boom in U.S.-produced shale gas, and Kinder Morgan said it will take whatever steps it needs in order to get the deal approved by regulators.
“As natural gas expands and becomes an even larger component of our energy economy, it positions this combined company to have an integrated national system and clearly as this new production comes on line in places as far apart as Pennsylvania and North Dakota, there is going to be a need for new pipeline,” Yergin said.
Yergin said Bakken has put North Dakota on the map as the fourth largest oil producing state in the U.S. “The Bakken formation not so many years ago was producing 10,000 barrels a day. Now it’s 450,000. We expect altogether tight [unconventional] oil in the U.S. to reach as much as two million barrels a day by 2020 and perhaps even more,” he said.
(In full disclosure, Yergin kicked off his book tour in New York Sept. 19, at an event held by the Financial Women’s Association of New York, of which I am a board member. I interviewed him about his book and energy industry issues during that event.)
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inside baseball – telecoms did the same shit in the 90’s.