M&A

It certainly is looking as if the sector as a whole could get some M&A induced rerating, albeit many from undervalued levels as you note. Aren't most E&P's currently valued using the assumption of Oil at $75/bbl? I seem to recall reading that in several places over the last twelve months.

My only fear is that, similar to EO, several get taken out on the cheap. Am hoping NPE sees some action as well. But interesting times ahead that's for sure. The big one that everyone is talking about is GKP - should that come to pass then one will see alot of the proceeds reinvested across the sector.

Indeed, one has to hope the Greek situation doesn't put a spanner in the works - things aren't looking too promising there at the moment. Plenty to go wrong on the Europe front that's for sure.

In reply to Fangorn, post #627

My only fear is that, similar to EO, several get taken out on the cheap.

I'm not sure that this is a major concern. Look at Ithaca for example - now 170p on the news of an approach, versus a low in August of 90p. And it has never been over the 207p ish in 2007 - and has visited c 12p since then. Even Dominion got a decent price near their highs for the last few years.

Of course it depends on how much control the targets have over their share register - but most deals are going to be consensual - or they won't happen.

Interesting to see PTTEP mentioned in dispatches re Cove:

Reuters on Monday quoted PTTEP chief executive Anon Sirisaengtaksin as saying: "We are studying a plan but no real decision has been made whether we will make a bid or not.

"Eventually, it will depend on the price...We are keen on some projects with most of the assets located in Africa.

I wonder whether the Sunday Times guessed the target correctly.....

In view of the fact that the E&P sector really hasn't even kept pace with the market in recent weeks, the fact that oil prices remain strong must surely be tempting company buyers looking for production growth, especially as the majors continue to report flat or falling production numbers?

The FT comment today about oil prices, suggests that estimates of demand and supply are both wrong and not believed by the markets:

Demand is low on paper but physical traders feel it is higher, particularly in emerging countries in Asia, east Africa, Latin America and the former Soviet Union.

The energy market, however, focuses on developed countries, with most of the data coming out of the US, where consumption continues to fall on a year-on-year basis.

Supply, on the other hand, is running lower. The market has lost 350,000 barrels per day of crude from South Sudan; Iran is also exporting less, the Buzzard oilfield in the North Sea has problems again and the recovery of Libya’s crude oil output has stalled since December. Moreover, the promised large increase in Iraq exports of crude oil has yet to materialise.

In a clear sign of the supply-demand tightness, the price of Brent crude has jumped. The global benchmark hit $118.17 a barrel on Thursday, the highest level in six months.......

On paper, the supply and demand balances suggest that the first quarter should see a counter-seasonal build-up of crude oil inventories, the first in eight quarters. But in reality, the physical market is suggesting that the world continues to draw down stocks.

Interesting piece in tomorrow's FT, prompted by the unusual leaking of a potential bid in the E&P sector (Bowleven/Dragon). The article concludes:

London is less leaky.

Should we applaud this, pausing only to scold the FSA for arriving so late with the clampdown? Maybe. Clean markets should equate to fairer markets.

Unfortunately, there are also unintended consequences here. Silencing (or at least muffling) the chattering market classes that test speculative stories and press reluctant companies into sharing more information risks sucking the life out of this particular investment arena. Worse, it risks increased volatility as fresh “formal” information comes as a shock to market participants; market gossips do a good job of smoothing information flows. Worse still, it hands overwhelming control of the corporate news flow to listed companies themselves – something which is downright unhealthy from the perspective of investors.

It is not widely appreciated, but “managed” news can be far worse than leaked news, and that’s one area the FSA has barely examined.

I've highlighted two points that I believe to be complete and utter rubbish!  The author seems to favour informed gossipers making profits at the expense of ignorant outsiders - and he appears to think that news that comes as a "shock"* must necessarily be bad. Complete cobblers! .......if (institutional?) investors don't do their research properly, then they will miss holding stocks that become the subject of takeovers at large premia. That will be their loss - and their fault, for not doing what they are supposed to be doing - namely picking stocks that are undervalued!

As for giving companies control over what gets into the public arena, surely that is just right and proper - because then everyone is on a level playing field, unless they are clearly insiders who are prohibited from profiting from such inside knowledge.

As to the point about "managed news", share price volatility (as a result of deals leaking) rarely benefits anyone except well plugged-in hedgefunds and merger arbs.......and keeping abortive discussions firmly under wraps is actually a very good thing!

ee

* regular readers will know that I'm expecting to see some of that at some point.....and for longstanding shareholders (who have done their own research) to benefit, rather than the Johnny-come-latelies.

And so it starts....proposed cash offer for COV @ 195p/sh from Shell.

http://www.investegate.co.uk/article.aspx?id=201202220704198768X&fe=1


The firs, of many, I suspect.

Centrica, the parent company of British Gas, has reached an agreement with Total E&P UK (and its affiliates) to acquire their non-operated portfolio of producing oil and gas assets and associated infrastructure in the Central North Sea (CNS) for a total cash consideration of $388 million (£246 million). Around 20% of the consideration is allocated to UK tax allowances.

The portfolio includes seven producing fields in three major areas: Greater Armada, the Alba field and the Mungo and Monan cluster. Centrica’s share in these fields has an estimated 22 million barrels of oil equivalent (mmboe) of 2P reserves (36% gas, 64% oil), increasing its reserves by approximately 5%, and is expected to produce 9,300 boe per day in 2012. The oil and gas is mostly un-contracted and linked directly to the UK market.

http://www.energy-pedia.com/news/united-kingdom/new-149241?editionid=100858

More activity in the North Sea. Looks to be a decent $/boe (between $12-17, depending on how much you attribute to tax losses), and there is plenty gas in there too.

Still eagerly awaiting the outcome of the situation at Ithaca, which will likely be coming to a head shortly, one way or another...

thanks to ohisay on Fool.......


DJ MARKET TALK: Oil Majors Seen Buying Cheap Producers -Westhouse

1049 GMT [Dow Jones] On the back of recent oil company acquisition news, Westhouse Securities expects more cash-rich oil majors to take advantage of current low valuations to buy, as "it is clearly cheaper to buy reserves through the stock market than to explore." It notes the recent Royal Dutch Shell (RDSA.LN) bid for Cove Energy (COV.LN) and a possible offer from Dragon Oil (DRS.DB) for BowLeven (BLVN.LN). Westhouse notes that in the current industry environment, large companies will primarily be looking for bid targets trading at a substantial discount to NPV. The brokerage sees companies such as Coastal Energy Co. (CEO.LN) Soco International (SIA.LN) as possible targets for their operations in Southeast Asia; Antrim Energy Inc. (AEN.T), Ithaca Energy Inc. (IAE.T) and Nautical Petroleum (NPE.LN) as possible targets for operations in the U.K. North Sea; Petroceltic International (EG5.DB) and Gulf Keystone Petroleum (GKP.LN) as possible targets for operations in Africa and the Middle East; Global Energy Development (GED.LN) as a target for its LatAm operations; Indus Gas (INDI.LN) as a possible target for its India operations and Northern Petroleum (NOP.LN) as a target for its European operations. Westhouse has buy recommendations on Ithaca Energy, Nautical Petroleum and Northern Petroleum. No recommendations on the others.

In reply to oilretire, post #634

It's interesting to see Global Energy Development (GED.L) listed as a takeover prospect.

They have US listed Harken Oil Corporation (HKN) and associates as a 60% shareholder (from memory - it may be more now) so they ain't goin' nowhere without HKN's consent.

HKN have a 'colourful' history, including connections to one GW Bush.

http://en.wikipedia.org/wiki/HKN,_Inc.

GED is sitting on comparatively huge reserves, mainly heavy oil in Colombia and Peru, which are not reflected in its valuation. It has been very succesful in its conservative approch to managing cash but painfully slow to realise the potential of its reserves.

There is a danger that when/if they address the production prospect HKN may gobble the rest of us holders up.

A bit of a boring medium/long buy on the dips and hold for me.

fuiseog

I posted this on FT.com today;

I prefer Soco International. 

Daily production of oil from its new oilfield TGT, looks like 50,000 BOPD, expected to reach 95,000 in August.

Soco has a non standard profile and the market undervalues it because it is not understood; but its objective is to be taken over when the assets are fully developed. The Stockopedia website had several useful discussion forums, I post as MadDutch.

The biggest attraction is the directors control over 40% of the shares, so their interests are fully aligned with the shareholders; there will be no hostile takeover that undervalues the company, as happened to Dana.

MadDutch

El Paso in the sights of private equity firm........

http://online.wsj.com/article/SB10001424052970203960804577241782869753396.html

A group led by private-equity firm Apollo Global Management LLC is nearing a deal to acquire El Paso Corp.'s oil-and-gas exploration unit for about $7 billion, people familiar with the matter said.

An agreement with the Apollo-led group, which also includes energy-focused private-equity firm Riverstone Holdings, could be signed as soon as Friday, the people said. Negotiations are continuing, and the talks could still fall apart or the deal could be delayed, the people cautioned.

If completed, the deal would represent one of the largest buyouts in the past year in an industry that has seen a flurry of deal activity.

For those that missed it yesterday...the Genel presentation..Tony Hayward comments on genel's Kurdistan movements, and likely areas of "acquisition" activity.

http://www1.axisto.co.uk/webcasting/investis/genel-energy/capital-markets-day-2012/

Further acquisitions in Kurdistan by Genel are apparently off the table. What they are looking at is Middle East and Africa although he did mention he thought prices were, in some instances, a bit rich currently post COV takeover bid.

http://www.investegate.co.uk/article.aspx?id=201202241452141033Y&fe=1

PTTEP offer 220p/sh for COV

In reply to Fangorn, post #639

This could be a three or four way contest by the middle of next week, I guess......

....and the shares being up to 240p currently tell you what the next bidder will need to pay as a minimum.

Interesting times anyway, for those sat on strategic assets, whether Cove Energy (LON:COV) or others.....  such as SOCO International (LON:SIA)

ee

In reply to emptyend, post #640

I suspect as much. Just get the feeling that the we are at the calm before the storm stage (the storm being where we get a succession of companies suddenly put in play, with bids and counter bids materialising).
Oil rising adding fuel to the fire it seems.

It does indeed look as if Soco's days could be finally numbered in the near future. Along with a handful of other names(Ophir, NPE etc)

Dana (via KNOC of course) increasing stake in Bittern. Not quite a 'major' field as the writer states IMHO.

http://www.heraldscotland.com/business/company-news/dana-petroleum-raises-stake-in-north-sea-field.16838007

The company has agreed to buy the 28.3% stake in the Bittern field owned by America's Hess Corporation, increasing its share of the asset to 33%. The terms of the deal were not disclosed.

It is thought Dana Petroleum may have agreed to pay Hess more than $200 million (£125m) for the stake.

In reply to oilretire, post #637

El Paso deal agreed for $7.15 billion

http://www.worldoil.com/El_Paso_to_sell_exploration_and_production_business_to_private_equity_firms.html

Didn't realise they were close to break up. Not sure what it all means for progress (or lack of) with AEX.

Can't copy text out of the link for some reason.

I'm not at all surprised that the ep assets have gone. It was never km's intention to keep them. Probably explains a bit of foot dragging by them last year though.

More M&A speculation from analysts being reported - this time focusing on Ophir.

In reply to emptyend, post #640

Re Cove Energy (LON:COV) and my earlier comment that:

This could be a three or four way contest by the middle of next week, I guess......

The Indian press has an interesting comment this morning:

State-owned oil majors ONGC and GAIL plan to outbid Royal Dutch Shell and Thailand's PTTEP with a $2-billion offer for UK's Cove Energy, which has been put on the block.

Cove Energy has exploration and development assets in Africa. The combined bid of the Indian firms may value the London-listed firm at 245 pence, which is 11% more than the Thai rival's offer and at an almost 20% premium to the Shell bid. OVL, ONGC's overseas arm, and GAIL may place the offer as early as this week after necessary approvals from the Indian government, said sources familiar with the matter.

I don't see 245p cutting the mustard either. Ultimately it'll need 275p+ IMO.

ee

ps...Cove Energy (LON:COV) shares up 9p this morning to 245p on the back of this