Takeover Targets
Posted: Fri Feb 03, 2012 1:49 pm
Several of our Sweet 16 were listed in a special report from UBS as potential takeover targets.
From the report:
Are conditions ripe for accelerating M&A activity in the US E&P sector? Majors have been net sellers of US properties for most of the last several decades. However, the emergence of enormous resource potential from the unlocking of shale gas and oil development coincides with a time when the Majors rising cash flows from higher oil prices are finding limited re-investment opportunities given declining access to resources abroad. With the E&Ps having won the great shale land grab over the last 7 years, Majors have shown an increasingly acquisitive appetite over the last two years and we expect consolidation to accelerate in 2012.
* The purpose of this report was twofold:
1) outline the shift in behavior of Majors from net sellers of US properties to net buyers over the last 2 years, & show their increasing desire to operate US assets; &
2) provide a framework to see which of the 41 E&P companies analyzed make the most attractive targets and which E&Ps may be most willing sellers.
* How to identify potential E&P takeout targets? Our scorecard takes into account:
1) a higher ratio of unbooked resource-to-proved reserves provides greater re-investment opportunity for cash-rich Majors; 2) which CEOs would benefit the most in compensation on an absolute & relative basis from a change in control; &
3) which E&P balance sheets are most financially stretched.
Notably, we found no meaningful evidence that older CEOs are more likely sellers.
* UBS’s list for most likely E&P M&A takeout targets include: APC, COG, CLR, EOG, OAS, PXP, RRC, SM, SWN.
From the report:
Are conditions ripe for accelerating M&A activity in the US E&P sector? Majors have been net sellers of US properties for most of the last several decades. However, the emergence of enormous resource potential from the unlocking of shale gas and oil development coincides with a time when the Majors rising cash flows from higher oil prices are finding limited re-investment opportunities given declining access to resources abroad. With the E&Ps having won the great shale land grab over the last 7 years, Majors have shown an increasingly acquisitive appetite over the last two years and we expect consolidation to accelerate in 2012.
* The purpose of this report was twofold:
1) outline the shift in behavior of Majors from net sellers of US properties to net buyers over the last 2 years, & show their increasing desire to operate US assets; &
2) provide a framework to see which of the 41 E&P companies analyzed make the most attractive targets and which E&Ps may be most willing sellers.
* How to identify potential E&P takeout targets? Our scorecard takes into account:
1) a higher ratio of unbooked resource-to-proved reserves provides greater re-investment opportunity for cash-rich Majors; 2) which CEOs would benefit the most in compensation on an absolute & relative basis from a change in control; &
3) which E&P balance sheets are most financially stretched.
Notably, we found no meaningful evidence that older CEOs are more likely sellers.
* UBS’s list for most likely E&P M&A takeout targets include: APC, COG, CLR, EOG, OAS, PXP, RRC, SM, SWN.