Hope you all have a good week,dont waste too much of your time on here. I will look in again on Friday but I dont expect anything new to appear, just more tales about the box and optimistic T/O price. Looks like a good week weather wise so enjoy !!
However, the team at Jefferies have slightly different ideas.
They reckon that rather than an anticipated "M&A frenzy," it is value and strategic rationale, rather than oil price outlook, which will be the true driver of deals.
The broker says Oil & Gas sector corporate transactions since October 2008 show a "steady spread of deals rather than a 'frenzy' at various times".
"The E&P weighted average of ~$16/boe [barrels of oil equivalent] for 2P reserves (15 deals) reduces to ~$13/boe including the two (yet to complete) IOC [international oil companies] deals. Crucially though, the targets fell to significant discounts ahead of bids, allowing sufficient premiums (49% on average) to get the deals over the line."
This causes Jefferies to look for stocks trading at a sufficient discount to $16/boe to allow a satisfactory bid premium, and with a clear de-risked asset (2P reserve) base or strategic rationale.
"We would argue that the most discussed M&A candidate of current and past years - Tullow Oil - does not come close to passing this screen and in our view the current renewed M&A hype surrounding the name is unfounded," says the broker. "Trading at $22/boe of 2P reserves and with mainly East African 2C resources unlikely to convert to reserves anytime soon (and expensive in contrast to partner Africa Oil) the value argument does not stand up and we remain sellers of this stock."
So, who is cheap?
"At the 'cheap' right-hand side of the charts Kurdistan and LNG resources dominate. We would point to $4.5/b for Kurdistan 2P reserves & $2/boe for 2C LNG resources as precedent deal metrics," writes Jefferies.
It likes Genel, but points out that all the Kurdistan names - including Gulf Keystone Petroleum (GKP) and Norway's DNO - operate under a high government take fiscal regime, which contributes to historic deal metrics at sub $5/boe of 2P reserves. "Value can be found in these names but it is relative, i.e. not comparable to the $16/boe metric in other areas."
Elsewhere, Ophir Energy (OPHR) shows as the cheapest stock on a 2P+2C basis at US$1.1/boe, although, similar to Kurdistan, "value is relative for LNG contingent resource also".
With the amount of fund raising the really big majors have raised recently, even smaller majors like BP are no longer safe, such has been the impact of the oil price fall. While I think that GKP's assets have value, I don't envisage any bid anytime soon. As I said before, perhaps a farm out of Shaikan or some such deal.
As reported .... John Gerstenlauer, said at the end of last year that once the Kurdistan Regional Government sorted out its arrears with companies “we should see a consolidation in the region”, that to my mind is at the earliest 2016. I would also suggest that anybody buying in to GKP presently, should at least keep some funds by for a rights issue later in the year, as clearly the KRG are neither to be trusted with monies from the ICG nor with the best interest of the oi companies at the moment.
Yes, I understand the time scale to making a bid based on gathered information from GKP but I really think that more secure oil asset can be bought else where as long as the oil market remains below $80. Were I a CFO of any of the majors atm, I would be in no rush to invest in the smaller E&P companies out there as there is a growing squeeze on them, as we in GKP are all too familiar with...Buy and hold...... Still see bid prospects below 50% presently... GLA...
Genel and Dragon oil now in play. Great news "Mr Hayward has not ruled out the possibility that Genel Energy might be a buyer of another company operating in the Kurdish region and has been linked to Gulf Keystone Resources, a London-listed company whose main asset is the Shaikan oilfield. Dragon Oil, which last month said it had a buyout approach – but no formal offer – from its largest shareholder, the Emirates National Oil Company in Dubai, could also be in t
"Mr Hayward has not ruled out the possibility that Genel Energy might be a buyer of another company operating in the Kurdish region and has been linked to Gulf Keystone Resources, a London-listed company whose main asset is the Shaikan oilfield. Dragon Oil, which last month said it had a buyout approach – but no formal offer – from its largest shareholder, the Emirates National Oil Company in Dubai, could also be in the running."
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