It’s a different profile from sanctioned, conventional projects with the commitment to upfront spend and a longer wait until payback.
Third, liquidity – to access assets, build a business and, if need be, to exit.
US$57billion in Permian deals has been done in the last three years – 20% of total global M&A spend, and twice as much as other tight oil plays combined.
Yet it’s still a fragmented market, with more than twice as many publicly listed operators than either the Bakken and Eagle Ford, and three hundred other players that have drilled wells. There are multiple ways in – acquisition, partnership, JV or through a private equity vehicle.
Fourth, the skill set.
New entrants need not start out with the tight oil skill set; everything through the value chain can be outsourced. Internal understanding and skills can be built up over time.
The US is the current working laboratory, other plays will emerge elsewhere. Having the know-how, the technology, the processes will equip a new entrant with the wherewithal to transfer acquired skills to any new play internationally.
We’ll tackle the cons next – the risks, the downsides, the valuations.