Oil at the edge of a wave of M & A
The low valuations in the oil sector fusionsacquisitions promote movement among independent companies.
The oil industry is no exception to the general recovery of mergers and acquisitions. The movement began in mid-April when Glencore took control of Caracal Energy for $ 1.5 billion, is the largest acquisition of an independent oil company for a year. He then accelerated with the announcement of the merger between Australian companies Roc Oil and Horizon Oil and OPA fund Qatari Al Mirqab on Heritage Oil for $ 1.55 billion. The stock momentum is favorable and returned to independent oil companies. The industry has realized an undervaluation of assets. Indeed, valuation levels fell to less than $ 6 per barrel on independent 3P listed in London, the lowest in five years should raise the appetite of large companies, which often struggle to grow so organic and have to deal with discovery costs that arise between $ 7 to $ 8 a barrel, or about 40% above these valuation levels.
It is difficult to predict the operations of M & A, but we believe that among European integrated RD Shell, BP and Total are potential buyers. And among the targets, we think Ophir Energy, Africa Oil, Cobalt International Energy and Tullow Oil. RD Shell could look at Ophir Energy due to its exposure to gas in East Africa. The acquisition by Africa Oil Total much sense as it would make a natural expansion of assets in Uganda to Kenya, which could allow Total to optimize its development in the region and reduce costs . Moreover, such an operation to provide a total potential at significant exploration.
Sandrine Cauvin manager at Turgot AM