Shale Oil: Elliott Management bids for QEP Resources

The wave of takeovers in the U.S. shale oil sector continues: Hedge fund Elliott Management (Paul Singer) makes a $2.1 billion proposal for Permian shale driller QEP Resources, as several news agencies report.

The offer is 44 percent above last week´s closing price but still way below the share price of last summer when crude oil was above $70 per barrel. QEP has 51.000 acres (c. 200 km²) in the Permian Basin, located close to large operators like ExxonMobil or Encana.

As large oil majors pour into the shale sector, small and mid-sized oil drillers owning attractive acreage have become the target of financial firms and large oil companies. For the likes of ExxonMobil or BP, shale oil is an interesting option for diversification and de-risking of capital investment thanks to short project times and predictable cash flow. For financial firms, some mid-sized drillers appear to be undervalued when oil prices fall and financing conditions for the oil firms deteriorate.