Oil price bloodbath to spark energy sector buying spree

Fri Dec 19, 2014 8:29am EST
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* Cash-rich majors the most likely buyers

* M&A flurry expected once oil prices stabilise

By Ron Bousso

LONDON, Dec 19 (Reuters) - Large oil companies flush with cash are expected to seize on the recent collapse in oil prices to begin a shopping spree for smaller rivals, focusing on oil producers and explorers in Africa, Asia and the United States.

With benchmark Brent crude prices nearly halving over the past six months to $60 a barrel, energy companies have also seen their share prices tumble and are already adjusting the value of their assets and cutting budgets.

Repsol's move this week to buy Talisman Energy , Canada's fifth-largest independent oil producer, for $8.3 billion was seen as a harbinger of things to come.

Though analysts said the Spanish company moved too early, a flurry of deals is expected to follow.

"We believe the current environment will precipitate a wave of M&A activity in the European E&P (exploration and production) sector once the oil price stabilises and begins to firm," investment bank BMO Capital Markets said.

Companies with strong in-house production in early stages at a relatively low break-even price of $20-$50 a barrel located in a region with low risk and enjoying backing from the local government are the most attractive targets, BMO said.   Continued...