How can oil companies benefit from increased M&A activity?
The oil and gas industry has witnessed several significant acquisitions in 2012 but as operators from small caps to NOCs all taking part in M&A activity, what can they gain from successful acquisitions?
Reducing exposure to risk
Cairn Energy have recently acquired Agora Oil and Gas and are in the process of securing Nautical Petroleum, the Guardian reported Cairn were looking to de-risk their portfolio with an increased presence in the North Sea,
‘Cairn Energy has announced the surprise £414m purchase of North Sea oil company Nautical Petroleum, its second acquisition in the region as it tries to spread the risk of its Greenland projects.’ Full article can be found here
So in the case of Cairn and their recent acquisitions they were trying to remove risk from their overall business strategy, operations in frontier regions such as Greenland hold such higher levels of financial and HSE risk that it is necessary to include less riskier resources as part of the overall portfolio.
The recent news that CNOOC are in an acquisition bid for Nexen demonstrates the expensive lengths even National Oil Companies have to go to in order to be able to significantly grow their portfolio in new regions. I found the Reuters article on the bid particularly interesting, more information can be found here
CNOOC are not the only Chinese company to register interest in North American companies, SINOPEC have recently bought a $1.5billion stake in Talisman Energy’s North Sea company and operations. Equities.com reported the article here
Do you agree?
Are there any other ways operators can benefit from M&A activity?
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