M & A Activity

[dan_s]

Analysts predict big year for oil industry mergers. E&E News.
Consolidation in the oil and gas sector has been slow, but some analysts think that's about to change in 2018. With the oil price crash beginning in mid-2014, many oil industry observers assumed companies would combine in order to stay alive. But that hasn't really happened, aside from some key mergers and acquisitions in the oil field service sector. Two offshore drilling rig contractors also merged in another transaction. Otherwise, the dearth of dealmaking or consolidation during this down cycle, particularly in the upstream exploration and production side of the business, has been noteworthy to experts who recall the waves of M&A deals cut in other past low oil price environments. But as the crude price stabilizes and companies prepare their spending plans for this year, many see more M&As on the horizon, with the long-awaited industry consolidation possibly picking up speed.

We are in the first inning of the "Rebound Phase" of this oil price cycle. The second inning is when Wall Street gains more confidence in the oil price and is willing to fund leveraged buyouts. Big takeovers will draw a lot of Wall Street attention as this is where it become apparent how under-valued most of the upstream companies really are. I worked in this area during my last three years at Hess. Today, there are some very good assets sitting in some prime takeover targets. Several are in our Small-Cap Growth Portfolio.

Activity picks up after Q4 results come out because the potential buyers will have fresh 3rd party reserve reports to look at.

[cmm3rd]

"Several are in our Small-Cap Growth Portfolio."

Could you list those to which you are referring so that we can focus our research?

Thanks.

[dan_s]

ESTE is always for sale, but their plan was to sell in 2020. Of course, the right price gets any deal.

LPI, LONE, SM and SRCI all have nice blocks of leasehold at very attractive prices. Most of the Sweet 16 are on the "radar screens" of the real big companies. RRC is a "Screaming Buy" for a Major that has a long-term view of gas prices.

What we did at Hess was focus on companies with large blocks of HBP leasehold in our core areas. We'd buy the company, terminate most of the people to reduce overhead, and sell off the assets we didn't want. We close on $3.5 Billion of takeovers when I was there. The big ones were private companies. We got into a bidding war for Lasmo, a British company with most of their assets in Venezuela and thank God we lost. We really wanted Vintage Petroleum, but OXY trumped our bid.

Hess moved from Tulsa to Houston when they acquired Transco's offshore subsidiary for $941 million. That was big for me, because I became the USE&P Division Controller as part of the move and worked my ass off for two years after the move. HESS = You work Holidays, Evenings, Saturdays & Sundays. I put in a lot of long hours 1994 & 1995.