The oil and gas industry's worst slump since the
financial crisis heralds a surge of takeovers for Goldman Sachs
Group Inc. and Sanford C. Bernstein Co. as Asia buyers put $150
billion in cash to work.
The market valuation of British and North American exploration
company reserves has dropped 23 percent this year to the lowest
since 2008, while Brent crude prices gained 8 percent to $102
a barrel. The dislocation between crude and company valuations
is extreme and may lead to twice as many deals as usual, Goldman
said last month.
Asian buyers could spend $150 billion by 2016 to secure energy
resources for their faster-growing economies, and targets could
include Tullow Oil PLC, Canadian Oil Sands Ltd. and Kosmos Energy
Ltd., according to Bernstein. London-listed Premier Oil Plc said
it will seek more acquisitions after buying EnCore Oil PLC for
$340 million on Wednesday.
"The valuations are pretty compelling if you believe in
$100 oil," said Christopher Wheaton, who manages RCM Ltd.'s
$140 billion Energy Fund in London. "Once the economic uncertainty
clears, we should see a pickup in deals. Asia still has the appetite
because the security of supply issues haven't gone away."
The FTSE All-Share Oil & Gas Producers Index rose 4.3 percent
as of the close in London, compared with a 3.7 percent gain for
the FTSE 100. Afren PLC, an explorer in Africa and Iraq, rose
7.7 percent, the most in 11 months, and Tullow increased the most
since Sept. 9.
Explorers that need money for drilling next year may find it
hard to get debt or equity funding if economies continue to deteriorate.
That may help better-capitalized companies looking to buy into
projects and fields, Phil Corbett, an analyst at Royal Bank of
Scotland Group PLC, said in a Sept. 23 note.
Among London-listed companies, Africa explorer Bowleven PLC may
be a target, while Cairn Energy PLC and Heritage Oil PLC have
cash to make acquisitions, Corbett said.
Goldman analysts also identified Bowleven as a potential takeover
target, as well as Falkland Islands explorer Rockhopper Exploration
PLC and Canada's Bankers Petroleum Ltd. in a Sept. 21 research
note. Bankers Petroleum rose as much as 15 percent in Toronto
on Thursday, the most since August 2009.
While Brent crude has dropped 13 percent since July, investors
forecast prices staying above $90 a barrel for the next two years.
That's 10 percent more than its five-year average compared with
the FTSE oil and gas producers' index and the Standard & Poor's
Oil & Gas Exploration & Production Index, both trading
below their five-year averages.
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