dealtalk - energy m&a looks up with asset sales rising
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DEALTALK-Energy M&A looks up with asset sales risingThu, 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 assetsare expected to pick up in 2010 as two large energy asset saleshave already been announced with more expected to come to lightin the near future.
Dealmakers said they expect companies to continue to selloff assets so they can focus their capital spending on theareas where they can reap the highest returns.
"You're going to see a robust M&A market," said a leadingenergy investment banker. "I think you're looking at anenvironment where you're not going to have a lot of economicgrowth. You're not necessarily going to have a lot of commodityprice growth. Companies are going to be struggling for ways tofind growth."
ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz) said in October that it plans toraise $10 billion from asset sales over the next two years inorder to cut its debt. These assets could include the company'sminority 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) saidlast month it plans to sell its Gulf of Mexico andinternational oil and gas assets.
The company is looking to pare back those assets and spendthe $4.5 billion to $7.5 billion in proceeds to focus on itsonshore U.S. portfolio.
"As the E&P companies look down the horizon and can seethat maybe we're coming out of the tunnel ... they can startplanning for that," said Marc Folladori, a partner in law firmMayer Brown's global energy practice.
"The way they'll best plan for that -- because a lot ofthem have had layoffs and cutbacks -- is that they'll start toconcentrate 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 onthe market, said Bobby Tudor, chief executive of energyinvestment bank Tudor Pickering Holt & Co.
THE HAVES AND THE HAVE-NOTS
Bankers said that large, well-capitalized oil companiesincluding Exxon Mobil Corp (XOM.N: Quote, Profile, Research, Stock Buzz), Statoil (STL.OL: Quote, Profile, Research, Stock Buzz) andOccidental Petroleum (OXY.N: Quote, Profile, Research, Stock Buzz) should be buyers and would havemore access to financing in 2010 than they have had this year.
Oil prices fell below $33 a barrel in early 2009 aftersurging as high as $140 a barrel the previous summer. But oilprices have recovered and have been trading at around $70 abarrel since June.
The improved prices have given the better-capitalizedcompanies renewed confidence, so these companies will be morecomfortable looking to grow their resource bases after spendingmuch of 2009 cutting their costs and capital budgets.
Ian Fay, a partner at boutique investment bank OdinAdvisors, said that some of that conservatism may stretch intothe beginning of 2010, but noted that oil companies are already"re-evaluating their budgets for next year with one eye on thedepletion. They've got to replace those reserves."
China's state-owned companies have been looking to deploythe country's cash in order to lock up access to commoditiesaround the world. Bankers expect this to continue in 2010, andsee other Asian companies getting in on the act.
Indeed, South Korea's Korea National Oil Corp agreed to buyCanada's Harvest Energy Trust HTE_u.TO for $1.7 billion inOctober, and said it was looking at other deals around theworld. (For more M&A news and our DealZone blog, go towww.reuters.com/deals) (Additional reporting by Anna Driver in Houston; editing byPatrick Fitzgibbons and Matthew Lewis) (([email protected]; + 1 646 223 6021; Reuters
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Business & Financial News, Breaking US & International New... http://www.reuters.com/assets/print?aid=USN0354911920091203
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