Industry Trend Analysis - Western Shale Output On The Rise - FEB 2018

BMI View: Development of shale basins in Colorado, Wyoming and New Mexico are poised to accelerate over 2018 on the back of a more upbeat oil market. Production volumes will remain relatively small as the bulk of investment is directed toward the big three shale plays.

An improving outlook for oil prices has increased investor interest in US acreage in smaller shale plays throughout Colorado, New Mexico and Wyoming. Having lost its attraction following the oil price crash, the extension of the OPEC/non-OPEC production cuts and its support of higher prices, has encouraged onshore investors to revisit the less developed region.

This is evident in the dramatic increase in merger and acquisition (M&A) activity across the San Juan, Green River, Wind River and DJ-Basins over 2017, totalling nearly USD8.6bn through December 11 compared to just under USD2.0bn over the same period in 2016. This trend highlights a continued focus on portfolio optimisation with shale operators leveraging lower asset prices outside of the larger plays to expand contiguous acreage positions and prepare for an upswing in oil prices ( see ' Consolidated Positions Will Support Shale Growth ', December 13).

Western Plays Attracting Substantial Interest
US - M&A Transactions Share by Asset Area*, 2016 (LHS) & 2017 (RHS)
*YTD data through December 11. 'West' includes assets in New Mexico (ex. Permian) , Wyoming and Colorado. Data includes completed, pending and proposed offers. Source: Bloomberg.

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