* Half of the assets on sale are in North America
* North Sea could prove a hard sell
* Potential buyers holding out for further price falls
* Wave of deals expected within three to six months
By Ron Bousso
LONDON, Jan 30 (Reuters) - With more than $110 billion ofoil and gas assets on the block as companies big and small countthe cost of the collapse in oil prices, it is now a question ofwho will blink first to set the M&A scramble in motion.
Energy groups with spare cash, venture capital funds andmultinational and state oil companies are eyeing assets withvaluations that have largely tracked the halving of the oilprice to less than $50 a barrel since last June.
But with the exception of a few recent moves, includingRepsol's $3 billion acquisition of Talisman Energy, buyers have largely stayed on thesidelines.
"Deals have just about dried up because you're catching afalling knife," said Simon Henry, chief financial officer atRoyal Dutch Shell.
Though it hopes to sell assets worth $5 billion to $6billion this year, Shell is not ruling out purchases of othersthat will increase its production base, Henry said.
Diverging views on when oil prices will recover leave plentyof potential for disagreement over the value of producingassets.
"If you end up paying at $50 (per barrel) plus a $30 premiumand the oil price stays at $40 for three years you look a fool,or vice-versa," Henry said.
Strength in refining and trading and low debt mean Shellappears more able than some rivals to cover dividends fromoperating cash flow.
The entire industry is in the midst of spending cuts toensure shareholders get their pay-outs. Those savings will taketime to kick in but, even in the short term, bank borrowing willhelp avoid hasty sales of assets.
The waiting game will continue for a little while yet, saysRupert Newall, BMO Capital Markets' co-head of investmentbanking for Europe, the Middle East and Africa.
"We are going to need another three months of these pricesbefore sellers will become more realistic about the priceenvironment they are selling into today," Newall said.
DISTRESSED ASSETS
But as companies become "more desperate", as Shell's Henryputs it, and the divergence between valuations narrows, mergersand acquisitions are expected to flow.
"That will be driven in large part by financing challengeswhere there is a lot of debt rollover," Henry said, adding that such pressure could be most keenly felt with smaller andmedium-sized operations in North America but also some of thesmaller European companies.
While private equity funds aim to buy distressed assets thatthey expect to flourish once the oil price stages its eventualrecovery and majors look to expand production on the cheap,Asian national oil companies are expected to chase globalcapacity to secure supplies for their energy-hungry economies.
Potential buyers include Asian state-run companies such asChinese oil champions CNPC, Sinopec and CNOOC, as well as Indianand Japanese companies.
Based on company filings and announcements compiled by oiland gas consultancy 1Derrick, assets worth about $112 billiondollars are being offered for sale.
Half of these are North American, mostly U.S. oil and gasshale fields such as Anadarko's Wyoming field andReliance Industries' Eagle Ford assets, as well asConocoPhillips' oil-sands operations in Canada.
Outside North America, Russian oil giant Rosneft is offering its non-core operations while Apache hasmainly Egyptian assets for sale.
A total of 22 asset packages valued at about $16.6 billionwere put up for sale in the fourth quarter of 2014, comparedwith 56 worth $41.1 billion in the previous nine months, says1Derrick analyst Mangesh Hirve.
NORTH SEA PROFIT SQUEEZE
Similarly to Shell, BP is another oil major that hassaid it would consider acquisitions even as it sheds operationsin higher-risk, higher-cost regions such as Nigeria and Iraq.
"The area where we believe there is going to be lessinterest is in the North Sea, which is a mature, high-costs oilprovince," HSBC said.
Top players in the North Sea, including Total, BGGroup and ConocoPhillips, are all trying to sellassets in the region, 1Derrick says, and the chief executive ofFrench group Total said at the World Economic Forumlast week that the company would be investing less in maturefields to focus on assets with potential for higher returns.
A host of small operators could also try to sell North Seaassets as profit margins are increasingly squeezed.
"In the North Sea, we have a proliferation of relativelysmall companies; very few move the needle for fund managers,"said Jon Fitzpatrick, head of Macquarie Capital's oil and gasteam.
With so much on offer around the world, it looks unlikelythat investors such as Carlyle International Energy Partnerswill jump the gun.
As its managing director Marcel Van Poecke said this month:"After a crash like this, there is clearly more upside thandownside. This will be a great time to invest, but there is noneed to rush into it." (Additional reporting by Dmitry Zhdannikov; editing by DavidGoodman)
