Pent-Up M&A Could Release Flood of 2016 Deals

Lori Lancaster, managing director at UBS Investment Bank, said during the forum that she agreed, “The last thing any of the banks want is to end up owning these assets.”

However, she added, during the spring redetermination period, banks cut just an average of between 10 percent and 15 percent from the borrowing base.

Steve Trauber
Steve Trauber, Vice Chairman and Global Head of Energy, Citigroup
Vice Chairman and Global Head of Energy, Citigroup

“In this market, liquidity is king. You can access the market now, even though it is somewhat painful to do that. It may be better than doing it 6 to 9 months down the road if prices haven’t rebounded and stock prices are lower,” she said of making deals in the summer.

Oil, Gas Market Liquidity

What’s more, many producers that use hedges to stabilize their cash flows will see them expire in the second half of the year, Mitch Fane, EY’s oil and gas transactions leader, told Rigzone.

“If prices haven’t stabilized and [producers] can’t hedge based on a higher price, they will be motivated to sell,” he explained.

Many industry insiders speculated oil companies would be in distress and forced to sell assets. While some companies have had to reorganize, Fane said, capital markets have been available which allowed upstream companies to defer sales.

And, the capital markets are wide open, Trauber said, which will assist a ramp-up in activity between the summer and fall redetermination.


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Marc  |  June 09, 2015
Availability of finance has had a much larger affect on the delay.


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