Trader Talk

More Energy M&A Is Ahead


Get used to seeing more energy deals like today's announcement from Apache about its purchase of Mariner Energy for $2.7 billion in cash and stock.

Mariner is an independent oil and gas producer, with deepwater operations, principally in the Gulf of Mexico. Apache is a big oil and gas producer.

There's no doubt about it: big energy companies — not just Apache but Reliance, Total, Chevron, Devon and many others — are looking to buy nat gas and oil exploration companies.

The reasons:

1) many companies need more resources, and they can't grow fast enough organically.

2) energy companies have cash, and balance sheets are in much better shape than any time in the last several years.

3) weak natural gas prices

4) capital markets willing to fund deals.

There’s plenty of small-company consolidation that could go on here, much of it may happen under the radar of much of the investing public. There are probably three dozen or so small small, independent oil and gas producers that are publicly traded. Many have only a few dozen employees, with market caps under $500 million.

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