Mike, hello
Been there and done that, so I can give you a little insight on the process.
The first thing to get cut will be administrative in nature: Surplus offices will be closed, and the staffs will be combined and consolidated. Admin. staff: HR personnel, secretaries, IT people, and technicians will be let go next as office space diminishes. Technical (engineering) and management will first be decreased by both attrition and VR. Most of the experienced, hence marketable, people will take VR packages amounting to $100K ++ and go immediately to their next job, which has been pre-arranged during the pandemonium surrounding the merger. A few of these will return to the company later as $1000/day consultants, and stay on the payroll for years.
The exploration effort will change by virtue of economies of scale. The geological picture comes into focus much quicker when the takeover target's data room is opened up. This makes geological prospects easier to identify (Need more data! More input!) and hence initially decreases the total number of wells drilled.
In long-term reality however, nothing will change on a grand scale, although the new company may drill a few less wells overall, it won't be enough to make much difference - they still are out to make money, in my opinion, and will still be governed by the laws of the marketplace.
This is a phase we are going through...... in the 60's, oil companies owned their own drilling rigs until it became clear that it was no longer profitable to do so.
So, my take is: mildly bearish short term, no effect to beneficial effect long term.
Aggie |
