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Page added on January 5, 2016
Could this be the year for oil takeovers?
Low oil prices could spur further mergers and acquisitions (M&A) across the oil and gas sector in 2016, analysts told CNBC.
Speaking to CNBC on Tuesday, Karri Vuori, head of M&A at Panmure Gordon said that alongside healthcare and advertising technology, oil and gas is one of the top sectors to watch in terms of M&A deals this year.
“The juniors can’t support their asset bases anymore, their balance sheets aren’t looking very strong,” Vuori said.
It comes as oil prices continue to fall amid a supply glut that has shaken energy firms across the globe. Brent crude prices are down over 33 percent over the past 12 months and were sitting around $37.17 per barrel by mid-day London trade. U.S. benchmark WTI prices are close behind, down over 30 percent over the past 12 months, near $36.75 per barrel.
Most companies were able to hold out through the price troughs of 2015, Jefferies equity analyst Jason Gammel said, but 2016 could set the backdrop for further acquisitions by year-end.
“Smaller companies have been able to maintain balance sheet flexibility, but this could erode,” Gammel told CNBC in a phone interview.
But the first three months of the year could be the biggest hurdle for the small companies to clear, Abhishek Deshpande, an oil markets analyst at Natixis, explained.
Whereas many companies might have been able to extend their credit lines back in October, the extended oil price rout has added pressure onto firms who were already struggling.
“Particularly with oil prices hitting lows at some point in the first quarter…lots of sub investment-grade firms could be under a lot of stress, and for those with stronger balance sheets, those companies could take this as an opportunity to buy and acquire assets,” Deshpande said in a phone interview.
Deshpande forecast Brent prices will stay around $39 per barrel in the first quarter, but with prices rising to $56 by the end of the year, to average around $47.80 for 2016.
“You should see a lot of these companies under pressure in 2016,” Deshpande said.
7 Comments on "Could this be the year for oil takeovers?"
penury on Tue, 5th Jan 2016 4:54 pm
It is always going to be better at the end of the year. No one ever says”and it will get worse every month”.
makati1 on Tue, 5th Jan 2016 7:28 pm
Takeovers? How about bankruptcies and investor suicides in the oily industry?
Kenz300 on Wed, 6th Jan 2016 8:52 am
The transition away from fossil fuels to safer, cleaner and cheaper alternative energy sources continues…..
It Wasn’t Only Exxon That Knew About Global Warming Since the 1970s
http://ecowatch.com/2015/12/24/exxon-knew-global-warming/?utm_source=EcoWatch+List&utm_campaign=6d322e1a1b-Top_News_12_24_2015&utm_medium=email&utm_term=0_49c7d43dc9-6d322e1a1b-86023917
shortonoil on Wed, 6th Jan 2016 9:22 am
“oil and gas is one of the top sectors to watch in terms of M&A deals this year.”
We have repeated endlessly for the last two years that this would be the result of the depletion event now taking place. We have also repeated numerous times that a company that is in the energy business that is not producing energy is going out of business. As an example we have shown that the average Bakken well reaches the “dead state” in about 10 months, and after that it is no longer supplying energy.
To invest in today’s world one needs to understand the energy dynamics of petroleum production. Without it one is likely to be investing in the same old pig! Investment banks have an amazing assortment of lipsticks for their favorite porker! They come in a hundred different colors and flavors know as NPV10, positive dash flow, and 98 other varieties. But in the end, if a well is not producing energy, eventually one is going to wind up with bacon.
http://www.thehillsgroup.org/
MSN Fanboy on Wed, 6th Jan 2016 4:06 pm
Why is Shortonoil ETP graph so remarkably accurate….
I keep thinking you must be lying, yet here we are M&A Primed, just as you said.
shortonoil on Thu, 7th Jan 2016 8:07 am
“Why is Shortonoil ETP graph so remarkably accurate….”
The accuracy of the Etp Model comes about because it concentrates on the principal property of petroleum that concerns humans; energy! The other properties of petroleum; such as, mass, volume, temperature, viscosity, density, and etc. are secondary. Energy, and its behavior have been studied intensively for more than a century and a half. The Model is applying the best understood, developed, and proven knowledge known to man. Any other approach is likely to be influenced by someone’s opinion. Opinions are subject to personal desires, and wishes.
http://www.thehillsgroup.org/
BC on Thu, 7th Jan 2016 5:35 pm
https://app.box.com/s/xywlbqm8wswzhfmxh0paiil9cysh8cmk
https://app.box.com/s/vvt8ywyh6w3xxtgvv39myfny2jhgnu0e
https://app.box.com/s/h0p6s4ye96k6cx7smn0r2te0giganyy1
https://app.box.com/s/xcult10g1qfq3qi9wobow4j4l6j0pu0o
https://app.box.com/s/ejyjgfb5bsaupghi425y2vjlfl9um7hf
The charts above use different metrics to tell the same true story that short capably relates (but the names have been changed to protect the guilty :-D).
The differential change rate of oil consumption to final sales and final sales continues at a (permanent) post-Peak Oil recessionary rate.
Despite $33 WTI, oil ain’t yet cheap, gents. WTI in the mid- to upper $20s is not inconceivable as soon as this winter.
One of the big shockers to come will be when $20 oil causes a collapse in US oil production but also a concurrent decline in oil consumption, owing to the collapse in unsustainable marginal oil demand by the energy and energy-related transport sectors during the next global deflationary recession and financial market crisis.
The BIG oil producers know this risk, which is why they remain fully hedged through mid-year to late 2016 against lower prices when Iran brings additional supply to market (assuming the Israelis and Saudis don’t conspire to prevent it).