The Oil Industry’s Future

HOUSTON, Texas (AP) — Big Oil is set to spend billions on new exploration in 2009, but in addition to ocean beds thousands of feet below the water’s surface, major producers are surveying the balance sheets of vulnerable companies in the sector.

Major oil companies are sitting on enormous piles of cash after posting record profits in recent quarters, while crumbling stock and crude prices have made many smaller oil and gas companies potential targets.


The disparity in the energy sector comes as Exxon Mobil Corp., BP PLC and other oil giants find it increasingly difficult to secure new sources of fossil fuels the old-fashioned way — exploring and drilling for them.

Smaller producers that don’t have the same massive capital reserves have been stung by a credit crisis that’s severely limited or even paralyzed their ability to finance new exploration and production.

“You have a lot of smaller producers with a lot of property, but many are constrained right now,” said Brian Youngberg, an energy analyst at Edward Jones. “Then you have the major integrated companies with deep pockets that could potentially buy these reserves at relatively attractive prices. You’re probably going to see this happen as we move through 2009.”

AP