Dealtalk - Energy M&A Looks Up With Asset Sales Rising
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DEALTALK-Energy M&A looks up with asset sales rising
Thu, Dec 3 2009
(For more Reuters DEALTALKS, click [DEALTALK/])
* Deals for oil and gas assets expected to rise in 2010
* Well-capitalized companies will buy as others pare back
By Michael Erman
NEW YORK, Dec 3 (Reuters) - Deals for oil and gas assets
are expected to pick up in 2010 as two large energy asset sales
have already been announced with more expected to come to light
in the near future.
Dealmakers said they expect companies to continue to sell
off assets so they can focus their capital spending on the
areas where they can reap the highest returns.
"You're going to see a robust M&A market," said a leading
energy investment banker. "I think you're looking at an
environment where you're not going to have a lot of economic
growth. You're not necessarily going to have a lot of commodity
price growth. Companies are going to be struggling for ways to
find growth."
ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz) said in October that it plans to
raise $10 billion from asset sales over the next two years in
order to cut its debt. These assets could include the company's
minority stake in Syncrude Canada, an oil sands mining venture,
and some of its U.S. natural gas assets.
Independent oil and gas company Devon Energy (DVN.N: Quote, Profile, Research, Stock Buzz) said
last month it plans to sell its Gulf of Mexico and
international oil and gas assets.
The company is looking to pare back those assets and spend
the $4.5 billion to $7.5 billion in proceeds to focus on its
onshore U.S. portfolio.
"As the E&P companies look down the horizon and can see
that maybe we're coming out of the tunnel ... they can start
planning for that," said Marc Folladori, a partner in law firm
Mayer Brown's global energy practice.
"The way they'll best plan for that -- because a lot of
them have had layoffs and cutbacks -- is that they'll start to
concentrate on their core areas. Those assets that aren't core,
they'll start to sell off. And another E&P company may say,
'Well, that area is core to me -- let me add it.'"
Private equity-owned oil and gas companies may also be on
the market, said Bobby Tudor, chief executive of energy
investment bank Tudor Pickering Holt & Co.
THE HAVES AND THE HAVE-NOTS
Bankers said that large, well-capitalized oil companies
including Exxon Mobil Corp (XOM.N: Quote, Profile, Research, Stock Buzz), Statoil (STL.OL: Quote, Profile, Research, Stock Buzz) and
Occidental Petroleum (OXY.N: Quote, Profile, Research, Stock Buzz) should be buyers and would have
more access to financing in 2010 than they have had this year.
Oil prices fell below $33 a barrel in early 2009 after
surging as high as $140 a barrel the previous summer. But oil
prices have recovered and have been trading at around $70 a
barrel since June.
The improved prices have given the better-capitalized
companies renewed confidence, so these companies will be more
comfortable looking to grow their resource bases after spending
much of 2009 cutting their costs and capital budgets.
Ian Fay, a partner at boutique investment bank Odin
Advisors, said that some of that conservatism may stretch into
the beginning of 2010, but noted that oil companies are already
"re-evaluating their budgets for next year with one eye on the
depletion. They've got to replace those reserves."
China's state-owned companies have been looking to deploy
the country's cash in order to lock up access to commodities
around the world. Bankers expect this to continue in 2010, and
see other Asian companies getting in on the act.
Indeed, South Korea's Korea National Oil Corp agreed to buy
Canada's Harvest Energy Trust HTE_u.TO for $1.7 billion in
October, and said it was looking at other deals around the
world.
(For more M&A news and our DealZone blog, go to
www.reuters.com/deals)
(Additional reporting by Anna Driver in Houston; editing by
Patrick Fitzgibbons and Matthew Lewis)
((michael.erman@thomsonreuters.com; + 1 646 223 6021; Reuters
1 of 2 6/7/2010 11:48 AM
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DEALTALK-Energy M&A looks up with asset sales rising
Thu, Dec 3 2009
(For more Reuters DEALTALKS, click [DEALTALK/])
* Deals for oil and gas assets expected to rise in 2010
* Well-capitalized companies will buy as others pare back
By Michael Erman
NEW YORK, Dec 3 (Reuters) - Deals for oil and gas assets
are expected to pick up in 2010 as two large energy asset sales
have already been announced with more expected to come to light
in the near future.
Dealmakers said they expect companies to continue to sell
off assets so they can focus their capital spending on the
areas where they can reap the highest returns.
"You're going to see a robust M&A market," said a leading
energy investment banker. "I think you're looking at an
environment where you're not going to have a lot of economic
growth. You're not necessarily going to have a lot of commodity
price growth. Companies are going to be struggling for ways to
find growth."
ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz) said in October that it plans to
raise $10 billion from asset sales over the next two years in
order to cut its debt. These assets could include the company's
minority stake in Syncrude Canada, an oil sands mining venture,
and some of its U.S. natural gas assets.
Independent oil and gas company Devon Energy (DVN.N: Quote, Profile, Research, Stock Buzz) said
last month it plans to sell its Gulf of Mexico and
international oil and gas assets.
The company is looking to pare back those assets and spend
the $4.5 billion to $7.5 billion in proceeds to focus on its
onshore U.S. portfolio.
"As the E&P companies look down the horizon and can see
that maybe we're coming out of the tunnel ... they can start
planning for that," said Marc Folladori, a partner in law firm
Mayer Brown's global energy practice.
"The way they'll best plan for that -- because a lot of
them have had layoffs and cutbacks -- is that they'll start to
concentrate on their core areas. Those assets that aren't core,
they'll start to sell off. And another E&P company may say,
'Well, that area is core to me -- let me add it.'"
Private equity-owned oil and gas companies may also be on
the market, said Bobby Tudor, chief executive of energy
investment bank Tudor Pickering Holt & Co.
THE HAVES AND THE HAVE-NOTS
Bankers said that large, well-capitalized oil companies
including Exxon Mobil Corp (XOM.N: Quote, Profile, Research, Stock Buzz), Statoil (STL.OL: Quote, Profile, Research, Stock Buzz) and
Occidental Petroleum (OXY.N: Quote, Profile, Research, Stock Buzz) should be buyers and would have
more access to financing in 2010 than they have had this year.
Oil prices fell below $33 a barrel in early 2009 after
surging as high as $140 a barrel the previous summer. But oil
prices have recovered and have been trading at around $70 a
barrel since June.
The improved prices have given the better-capitalized
companies renewed confidence, so these companies will be more
comfortable looking to grow their resource bases after spending
much of 2009 cutting their costs and capital budgets.
Ian Fay, a partner at boutique investment bank Odin
Advisors, said that some of that conservatism may stretch into
the beginning of 2010, but noted that oil companies are already
"re-evaluating their budgets for next year with one eye on the
depletion. They've got to replace those reserves."
China's state-owned companies have been looking to deploy
the country's cash in order to lock up access to commodities
around the world. Bankers expect this to continue in 2010, and
see other Asian companies getting in on the act.
Indeed, South Korea's Korea National Oil Corp agreed to buy
Canada's Harvest Energy Trust HTE_u.TO for $1.7 billion in
October, and said it was looking at other deals around the
world.
(For more M&A news and our DealZone blog, go to
www.reuters.com/deals)
(Additional reporting by Anna Driver in Houston; editing by
Patrick Fitzgibbons and Matthew Lewis)
((michael.erman@thomsonreuters.com; + 1 646 223 6021; Reuters
1 of 2 6/7/2010 11:48 AM](https://image.slidesharecdn.com/dealtalkenergymalooksupwithassetsalesrising-12759258748354-phpapp02/85/Dealtalk-Energy-M-amp-A-Looks-Up-With-Asset-Sales-Rising-1-320.jpg)
