Merger & Acquisition Activity in the Appalachian Basin
June – July 2021
It is always important to understand your customers’ industry. The industry’s dynamics can have a profound impact on how you adjust your own strategy to meet your customers’ needs. The shale industry presents its own challenges to supply chain companies, including understanding why they are making certain decisions, and simply keeping track of current company ownership, management and business contacts.
First a bit of recent history. When the shale industry began its rapid growth here just over a decade ago, there were many new companies and people coming to our region. Some people were actually returning here for new opportunities – natives were likely the first to raise their hand for a relocation back to where they grew up or earned their degrees. Over the last decade, there have been many changes to the companies operating here. Most have bought and sold mineral rights to improve their acreage position (e.g., to build larger contiguous tracks). Some have sold all of their operations and used that capital to buy in another basin. Many have bought operations from other companies when they have the potential to operate it more profitably. And a few have even gone bankrupt. With each of these changes comes the exits and entrants of people and their positions.
Just a few of the recent announcements with ties to our region: EQT, based in downtown Pittsburgh and the largest natural gas producer in the nation, purchased Alta Resources’ local operations, managed out of Williamsport, PA, for $3 billion. Kinder Morgan bought Stagecoach Gas Services (a joint venture of Crestwood Equity Partners and Consolidated Edison, Inc.), announced on June 1 for $1.225 billion cash. Stagecoach includes four natural gas storage facilities and 185 miles of natural gas pipelines in Appalachia with interconnects to major interstate pipelines. Cabot Oil & Gas, with its regional headquarters on the Parkway West between downtown Pittsburgh and the airport, is working on an all stock merger with Cimarex (a Denver-based company) valued at $17 billion. These are just a few of the many changes to drilling and pipeline companies that are constantly underway in the industry.
What does this all mean for a manufacturer trying to sell into the shale value chain?
First, knowledge of the industry dynamics is important. Although a manufacturer need not be versed on every detail of each Merger & Acquisition (M&A) deal, knowledge of developments is important. Subscribing to a targeted trade news service such as Marcellus Drilling News or keeping an eye on industry news in national and regional news outlets should work. Knowledge of your current and prospective customers’ news is important. For example, if you are now selling to a large equipment manufacturer that sells primarily to an oilfield services company, you would want to know who that oilfield services company works for. If they are heavily dependent on a small handful of very large companies, then consider creating a news alert for those large companies to know when a major announcement has occurred that could have positive or negative impacts on your orders.
Second, do not have all of your proverbial eggs in one basket. Because of the dynamics of the industry, the company you are working for today may be a very different company tomorrow. The great contact you have at one company may be moved to another part of the country (or world) tomorrow. So, make sure you know multiple people within a customer’s company and that you are penetrating the industry from various companies.
Third, leverage your local presence. Buying from local suppliers is more important than ever in the oil and gas industry. If a new company has purchased acreage in this region, that would be an excellent time to approach them and their supply chain contacts.
Finally, if you don’t already have it, consider upgrading your sales database tools and investing the time to maintain your contacts. When a key contact is moving, make sure to get names and contact information for their replacement, and also stay in touch with them in their new job. Current contact information is key, though relatively more difficult to maintain in the oil and gas industry.
As events are opening back up, so are opportunities to meet prospective new customers in the shale industry as well as reunite with former contacts, regardless of their current employers’ name.
by Katie Klaber
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