Companies with high-dollar assets at their disposal are likely to begin divestitures in earnest once commodity prices stabilize, according to a new report from Moody’s Investors Service.
Following an uptick in mergers and acquisitions (M&A) activity during 2016’s second quarter, Moodys’ is predicting that a trend of heightened activity is in the offing. Petrobras is targeting $13 billion worth of asset sales this year alone. Inside the next two years, Royal Dutch Shell is considering sales of up to $30 billion. And after its $13 billion acquisition in 2015 of Canada’s Talisman, Repsol has billions of dollars’ worth of non-core assets at its disposal.
M&A has largely been on hold since the profound downturn in prices that began in the second half of 2014. Since then, asset values have dropped in many cases leading companies to put asset sales off until better values emerge. In May, Bobby Tudor, CEO of U.S. investment bank Tudor, Pickering Holt & Co. in Houston, said buyers are few in number and highly cautious.
As recently as this week, the now-bankrupt Hercules Offshore made public its plan to sell a rig worth $55 million in 2013 for the significantly lower price of $3.16 million.
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