Oil Slide Means 'Almost Everything' for Sale as Deals Accelerate
(Bloomberg) -- More than $200 billion worth of oil and natural gas assets are for sale globally as companies come under renewed financial pressure from the prolonged commodity price rout, according to IHS Inc.
There are about 400 buying opportunities as of September, IHS Chief Upstream Strategist Bob Fryklund said in an interview. Deals will accelerate later this year and into 2016 as companies sell assets to meet debt requirements, he said. West Texas Intermediate crude has averaged about $51 a barrel this year, more than 40 percent below the five-year mean.
Low prices have slashed profits and as of the second quarter about one-sixth of North American major independent crude and gas producers faced debt payments that are more than 20 percent of their revenue. Companies have announced $181.1 billion of oil and gas acquisitions this year, the most in more than a decade, compared with $167.1 billion the same period in 2014, data compiled by Bloomberg show.
“Basically almost everything is for sale,” Fryklund said Oct. 8 in Tokyo. “Low cycles are when a lot of these companies can rebalance their portfolios. In theory, this is when you upgrade your existing portfolio.”
Companies with strong balance sheets are seeking buying opportunities, said Fryklund, citing Perth, Australia-based Woodside Petroleum Ltd.’s $8 billion offer for explorer Oil Search Ltd. and Suncor Energy Ltd.’s $3.3 billion bid for Canadian Oil Sands Ltd. Both targets rejected initial offers.
As of August, one out of every eight junk-rated oil companies was in danger of defaulting, according to Moody’s Corp. WTI plunged below $40 a barrel in August, to the lowest price in six years. The grade added 0.3 percent to $46.81 a barrel on the New York Mercantile Exchange at 11:36 a.m. in Tokyo.
Next year the U.S. benchmark may trade around $55, said Fryklund. It will take several years for supply and demand to rebalance and prices may rise to about $70 a barrel by 2018, he said.
“These down cycles are really great for defining the winners for the next cycles,” said Fryklund. “The ones that have cash right now, the ones that have good financials are seeing lots of opportunities.”
--With assistance from Bradley Olson in Houston and Ben Scent in Hong Kong.
To contact the reporters on this story: Aaron Clark in Tokyo at email@example.com; Stephen Stapczynski in Tokyo at firstname.lastname@example.org. To contact the editors responsible for this story: Alexander Kwiatkowski at email@example.com Sungwoo Park.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Operates 3 Offshore Rigs
- Woodside To Raise $2B, Look To Offshore Gas Project For Growth (Feb 14)
- Chevron Starts LNG Output at Australia's Wheatstone (Oct 09)
- Global LNG: Faltering Supply Prompts Short-Covering Price Rally (Aug 11)
Company: Suncor Energy more info
- Suncor Going Autonomous in Oil Sands (Feb 01)
- Suncor Says Makes Progress In Oil Sands Project Dispute With Total (Oct 26)
- Canadian Oil's High-Priced Run Set to End as Supply Surges (Oct 11)