BHP Billiton’s Former Oil Chief Yeager Expects More U.S. M&A
BHP Billiton Ltd. (BHP)’s former oil and gas head J. Michael Yeager expects more industry mergers and acquisitions in the U.S. as onshore developers seek to sell assets they can’t develop and boost their technical skills.
“There’s a lot of churn that’s going to go on and you will continue to see a lot of transactional work,” Yeager, now chief executive officer of Maverick Drilling & Exploration Ltd. (MAD), said today in a phone interview from Houston. “Over time we hope to prepare ourselves to be part of that.”
Investor unrest over lackluster returns has prompted Occidental Petroleum Corp., Hess Corp., Apache Corp. and other energy companies to pursue breakup plans and global asset sales. Yeager, who led BHP’s $20 billion move into the U.S. shale gas industry before leaving the Melbourne-based company earlier this year, is focusing on oil in his new role at Maverick, an explorer developing fields south of Houston.
“When you take these large amounts of acreage, you have to drill it up, or you have to give it up,” Yeager said. “In some cases you may have three years to drill as much as you can and you lose the rest of it, so there’s acreage that people cannot handle on the market. There’s a lot of opportunity.”
Maverick shares have risen 12 percent in Sydney trading since the company announced Oct. 14 that it had hired Yeager. The company dropped 1 percent today to 47.5 cents, while Australia’s benchmark index fell 0.2 percent.
Maverick plans to double the number of wells drilled each month by this time next year and to start trading on the Nasdaq in the first week of December, according to Yeager, a U.S. Naval Academy graduate who worked at Exxon Mobil Corp. earlier in his career. The company expects to have lower costs than competitors because it owns all of its rigs, he said.
Yeager, 60, said a need for more technical expertise will also drive companies to combine. Yeager said he has been approached by a couple of groups seeking those skills.
Maverick, which trades in Sydney and has offices in Newcastle in Australia’s New South Wales state, as well as Houston, will consider expanding into new fields and joining with a “sister company that wants to work with us,” he said.
“A year from now we hope to be in a position where we can say, ‘we’re on top of our current portfolio, now is there something else we’d like to do,’” he said.
Maverick’s production last quarter rose 6 percent to 1,361 barrels of oil per day, compared with the previous three months, it said Oct. 30. The company said it received an average oil price of $108.24 per barrel during the quarter.
Even if oil prices decline, Yeager said he expects they would rebound.
The benchmark U.S. crude, West Texas Intermediate, dropped to a five-month low of $93.37 a barrel on Nov. 5 on speculation that inventories increased for a seventh week in the U.S. Brent crude, the benchmark for two-thirds of the world’s oil which has averaged $108.53 this year, probably will fall to the $70-to-$80 range, Fadel Gheit, an analyst at Oppenheimer & Co. in New York, said last month without providing a timeline.
“If it drops low for a while, that could happen, but I don’t think it’s sustainable,” Yeager said. “Liquids are scarce. The giant oil fields are few and far between and they are expensive and slow to develop. Adding more liquid barrels to a world that is thirsty, I’m bullish on that.”
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