Kimmeridge Publishes White Paper "Shale's Golden Years: Can Consolidation Keep the Industry Young?"

Details need for greater consolidation in E&P industry to overcome declining resources, deteriorating capital efficiency and rising F&D costs

Builds on Kimmeridge's firsthand experience facilitating well-executed consolidation among its investments

NEW YORK and DENVER, Oct. 7, 2024 /PRNewswire/ -- Kimmeridge, an alternative asset manager focused on the energy sector, today published a white paper entitled, "Shale's Golden Years: Can Consolidation Keep the Industry Young?"

The paper is the latest of Kimmeridge's extensive thought leadership on the topic of industry consolidation and builds on the firm's long-held thesis that the E&P industry must pursue more and better consolidation strategies to outrun its biggest threats: a declining resource base, deteriorating capital efficiency and rising finding and development (F&D) costs.

In today's monopolistic business environment – and even with the accelerated pace of oil & gas mergers in recent years – the E&P sector remains one of the most competitive. Kimmeridge contends that substantial opportunities for consolidation still exist in the industry, if executed with an eye toward sustainable value creation.

Ben Dell, co-founder and managing partner at Kimmeridge, said: "The pandemic accelerated oil and gas' maturation past its growth-at-all-costs mindset. However, while the industry has evolved, resource quality and capital efficiency have declined. The reality is that being larger in-basin is more efficient, and enhancing efficiency is crucial to offsetting the impacts of a dwindling resource base – one need look no further than Kimmeridge's own portfolio to see the benefits of consolidation in action. We believe the industry is far from the ideal level of consolidation, and the right number of E&Ps is much lower than the number we have today. Ultimately, the industry will be led by basin champions, and smaller operators will be left out in the cold."

Kimmeridge's Consolidation Track Record

Kimmeridge has successfully implemented its investment strategy with a focus on industry consolidation across various funds. In 2021, the firm facilitated the merger of Extraction Oil & Gas and Bonanza Creek Energy to create Civitas, Colorado's first net-zero oil and gas producer. This merger not only fostered enhanced financial and operational efficiency but also set a new standard for ESG practices in the sector. Civitas continues to pursue further consolidation opportunities in key basins to expand its inventory.

Likewise, in late 2023, Kimmeridge advocated for a merger between Chesapeake Energy and Southwestern Energy, highlighting their operational overlap and potential for significant synergies. Following the merger, the newly formed company, Expand Energy, became the largest natural gas producer in the U.S. and received an upgrade from S&P Global Ratings due to its increased production capacity and enhanced operational profile.

Simply put, Kimmeridge's consolidation thesis is deeply rooted in its thoughtful and decisive action across its own investment portfolio, demonstrating that well-executed mergers can unlock substantial value and drive a more sustainable industry.

To view more of Kimmeridge's research and thought leadership, please visit:
http://kimmeridge.com/research-archive/.

About Kimmeridge
Founded in 2012 by Ben Dell, Dr. Neil McMahon and Henry Makansi, Kimmeridge is an alternative asset manager focused on the energy sector. The firm is differentiated by its direct investment approach, deep technical knowledge, active portfolio management, proven sustainability track record and proprietary research and data gathering.

Media:
Daniel Yunger / Hallie Wolff / Emma Cloyd
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917.574.8582 / 917.842.1127

SOURCE Kimmeridge