igor's hunch.., page-10

Previously posted an article from Bloomberg in regards to European oil and gas majors, Shell and BP, delaying developments and projects in anticipation of a decrease in the prices of oil and gas (in turn leading to a decrease in costs). Analysts believe the oil majors are ready to pounce and make acquisitons as prices fall. Just putting the theory out there...

Energy Takeovers to Accelerate as Value Gap Narrows, UBS Says

Aug. 19 (Bloomberg) -- Acquisitions of energy producers will accelerate late this year and early next year as suitors and cash-strapped sellers both give ground on price expectations after a collapse in natural-gas markets, UBS AG said.

The dealmaking will probably begin as gas producers sell assets to raise cash, said Stephen Trauber, UBS’s global energy chief. Corporate takeovers will then pick up as executives weigh the shareholder-value merits of selling equity at a discount to bring in more cash versus selling their companies outright at a premium.

“Major oil companies have been waiting with the expectation that gas prices in particular, which is what many North American companies are based on, will continue to weaken,” Trauber said yesterday in an interview in Houston. “Headed into the end of this year and into next year, those major oil companies will see this as an opportunity to step in and acquire assets at a fairly attractive long-term value proposition.”

Trauber said both sides are now ready to compromise as buyers look at long-term prospects for strong gas demand and expiration of hedging contracts takes away the protection sellers had from plunging fuel prices. Now that capital markets have thawed following last year’s credit freeze, buyers can make purchases with confidence that they’ll be able to refinance the debt of acquired companies, he said.

“That was one of the issues that kept deals from happening,” Trauber said.

Acquisition Outlook

Asset sales will range in size from $50 million to as much as $1 billion, Trauber said. Entire companies could go on the block for as much as tens of billions, he said. Oilfield- services providers and refiners also may consolidate, he added.

New York gas futures have fallen 78 percent from their 2008 high, and oil prices are 54 percent below the record reached last year. As a result, the amount of money companies can borrow based on the value of their reserves will drop as banks determine their new credit bases next month, Trauber said.

Producers with large debt loads will look to get cash through the sale of properties or the issuance of equity, Trauber said. Major integrated and independent oil companies are the likely buyers, he said.

“There’s a large list today of larger independents that are in the position today to be able to take advantage of opportunities,” Trauber said. Apache Corp., Anadarko Petroleum Corp., Devon Energy Corp. and Canada’s EnCana Corp. are among producers that are “very strong” financially, he said.