M&A Activity
Posted: Tue Sep 08, 2015 1:49 pm
We are approaching the point in this oil price cycle where we should see a lot more M&A activity.
Here's why: http://finance.yahoo.com/news/citi-capi ... 27925.html
If the banks reduce or eliminate an upstream company's access to capital they can "hunker down" and try to survive or sell out to a larger company with more access to capital. The "hunker down" strategy often won't work because of leasehold drilling commitments. An upstream company cannot afford to let a lot of their undeveloped leasehold expire.
In addition to the large-caps with lots of money, there are well funded venture capital firms looking to swoop in and take some of these public companies private. By "rolling up" several small-caps, the VC firm can eliminate a ton of overhead. The idea is to streamline and then take the combined entity public again when commodity prices improve, which they eventually will do.
Two of the Sweet 16 that look like buyers are Devon Energy (DVN) and Cimarex (XEC). Devon has a long and successful history of mergers.
Here's why: http://finance.yahoo.com/news/citi-capi ... 27925.html
If the banks reduce or eliminate an upstream company's access to capital they can "hunker down" and try to survive or sell out to a larger company with more access to capital. The "hunker down" strategy often won't work because of leasehold drilling commitments. An upstream company cannot afford to let a lot of their undeveloped leasehold expire.
In addition to the large-caps with lots of money, there are well funded venture capital firms looking to swoop in and take some of these public companies private. By "rolling up" several small-caps, the VC firm can eliminate a ton of overhead. The idea is to streamline and then take the combined entity public again when commodity prices improve, which they eventually will do.
Two of the Sweet 16 that look like buyers are Devon Energy (DVN) and Cimarex (XEC). Devon has a long and successful history of mergers.