MELBOURNE, Jan 15, 2007 (Dow Jones Commodities News via Comtex)
Falling oil prices may help kick start more corporate activity in Australia's oil and gas sector, analysts said Monday.
Australia has a healthy number of mid-tier exploration and production companies and the takeover of Hardman Resources Ltd. (HDR.AU) by Tullow Oil PLC (TQW.DB) has sparked talk of a cleanout by larger rivals.
Peter Arden, an analyst at brokerage firm Intersuisse, said the drop in the oil price could be a catalyst for offers to start arriving.
"If we do see prices in the high US$40s to around where they are now for any length of time it will definitely bring some heightened activity," he said. The sliding spot oil price is now about US$53.38 a barrel, off a peak of US$78.40 last July.
Arden said companies like Tap Oil Ltd. (TAP.AU) and Arc Energy Ltd. (ARQ.AU) could be likely targets.
Roc Oil Ltd. (ROC.AU) managing director John Doran told Dow Jones Newswires the company doesn't consider itself a likely target if there is renewed M&A activity in the sector.
"We are not an obvious target at the moment - we are too diverse and we operate too much," he said.
"The share price is certainly lower than it was so you could argue that at some price it becomes a target, but we have lived in the zoo for a long time and we know most of the animals."
Doran said Roc is to some extent insulated from falling oil prices by the fact that it last year hedged 3.5 million barrels of production at an average of about US$70 a barrel.
Roc shares were 11 cents higher at A$3.74 in late Monday trade, off a 12 month peak of A$4.31. With much less exploration success, Tap shares are at A$1.47, off a year's high of A$2.95.
Macquarie analyst Andrew Blakely said there are constraints on the takeover of many of Australia's larger energy companies, with Woodside Petroleum Ltd. (WPL.AU) partly-owned by Shell, Oil Search Ltd. (OSH.AU) tied up with the Papua New Guinean Government and Santos Ltd. (STO.AU) bound by South Australian state government legislation.
"The smaller end of the market is probably more ripe for consolidation than the top end," he said.
"It needs to be a strategic fit, but there is room for consolidation."
Copyright (c) 2007 Dow Jones & Company, Inc.
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