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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.
Those include British oil and gas company BG Group, which produces oil and gas in regions including Brazil, East Africa and Australia. Other potential targets are Africa-focused explorers Tullow Oil and Ophir Energy as well as Kosmos Energy.
Tullow and Ophir shares have dropped by about 50 percent since June, while BG Group and Kosmos shares have fallen by about 30 percent, against a 26 percent decline in the European 600 oil and gas index.
Oil services companies are also on buyers' radars.
Halliburton Co has already swooped on U.S. peer Baker Hughes Inc in a $35 billion deal, but French seismic surveys company CGG remains a target for buyers after a failed acquisition attempt by Technip.
Major national and international oil companies with strong cashflow and the need to expand their own production would benefit most from buying smaller explorers and specific services. Those include ExxonMobil and Indian and Chinese oil companies, BMO's Brendan Warn said.
European oil majors BP and Royal Dutch Shell have both said in recent weeks that the low oil price presents buying opportunities despite being in the midst of cost-cutting drives.
Edmund Shing, portfolio manager at BCS Asset Management, said that the majors could boost profitability by combining operations, using money earmarked for upstream exploration to buy smaller E&P companies to acquire oil reserves on the cheap.
Historically, periods of intensive M&A activity have come shortly after oil prices have gained ground following sharp declines, such as in 2008-09, BMO said.
"Over the next 60 days or so we will start seeing companies announcing potential asset impairments, potential writedowns and maybe an inability to renegotiate large lines of credit," said Dale Nijoka, Ernst & Young's Global Oil and Gas Leader.
"E&P independents in some of the emerging markets are going to have to deal with their cost, cashflow and debt issues. They will likely look to find larger companies with balance sheet flexibility to get into the projects with them and get the oil and gas into the market."
In the United States, shale oil producers will opt to shed assets as declining oil prices hit profitability. High-quality assets in the Baaken, Permian and Eagle Ford regions will be the most sought after, according to Bobby Tudor, chief executive of U.S investment bank Tudor Pickering Holt & Co.
"Buyers can afford to be very picky," he said. (Additional reporting by Lionel Laurent and Pamela Barbaglia; Editing by David Goodman)