* Cash-rich majors the most likely buyers
* M&A flurry expected once oil prices stabilise
By Ron Bousso
LONDON, Dec 19 (Reuters) - Large oil companies flush withcash are expected to seize on the recent collapse in oil pricesto begin a shopping spree for smaller rivals, focusing on oilproducers and explorers in Africa, Asia and the United States.
With benchmark Brent crude prices nearly halving over thepast six months to $60 a barrel, energy companies have also seentheir share prices tumble and are already adjusting the value oftheir assets and cutting budgets.
Repsol's move this week to buy Talisman Energy, Canada's fifth-largest independent oil producer, for$8.3 billion was seen as a harbinger of things tocome.
Though analysts said the Spanish company moved too early, aflurry of deals is expected to follow.
"We believe the current environment will precipitate a waveof M&A activity in the European E&P (exploration and production)sector once the oil price stabilises and begins to firm,"investment bank BMO Capital Markets said.
Companies with strong in-house production in early stages ata relatively low break-even price of $20-$50 a barrel located ina region with low risk and enjoying backing from the localgovernment are the most attractive targets, BMO said.
Those include British oil and gas company BG Group,which produces oil and gas in regions including Brazil, EastAfrica and Australia. Other potential targets are Africa-focusedexplorers Tullow Oil and Ophir Energy as wellas Kosmos Energy.
Tullow and Ophir shares have dropped by about 50 percentsince June, while BG Group and Kosmos shares have fallen byabout 30 percent, against a 26 percent decline in the European600 oil and gas index.
SERVICES SWOOP
Oil services companies are also on buyers' radars.
Halliburton Co has already swooped on U.S. peerBaker Hughes Inc in a $35 billion deal, but Frenchseismic surveys company CGG remains a target forbuyers after a failed acquisition attempt by Technip.
Major national and international oil companies with strongcashflow and the need to expand their own production wouldbenefit most from buying smaller explorers and specificservices. Those include ExxonMobil and Indian and Chineseoil companies, BMO's Brendan Warn said.
European oil majors BP and Royal Dutch Shell have both said in recent weeks that the low oil price presentsbuying opportunities despite being in the midst of cost-cuttingdrives.
Edmund Shing, portfolio manager at BCS Asset Management,said that the majors could boost profitability by combiningoperations, using money earmarked for upstream exploration tobuy smaller E&P companies to acquire oil reserves on the cheap.
Historically, periods of intensive M&A activity have comeshortly after oil prices have gained ground following sharpdeclines, such as in 2008-09, BMO said.
"Over the next 60 days or so we will start seeing companiesannouncing potential asset impairments, potential writedowns andmaybe an inability to renegotiate large lines of credit," saidDale Nijoka, Ernst & Young's Global Oil and Gas Leader.
"E&P independents in some of the emerging markets are goingto have to deal with their cost, cashflow and debt issues. Theywill likely look to find larger companies with balance sheetflexibility to get into the projects with them and get the oiland gas into the market."
In the United States, shale oil producers will opt to shedassets as declining oil prices hit profitability. High-qualityassets in the Baaken, Permian and Eagle Ford regions will be themost sought after, according to Bobby Tudor, chief executive ofU.S investment bank Tudor Pickering Holt & Co.
"Buyers can afford to be very picky," he said. (Additional reporting by Lionel Laurent and Pamela Barbaglia;Editing by David Goodman)
Tullow Oil (TLW)
BP (BP.)
