Worldwide oil production will not scale back output, as the price of oil continues to drop. OPEC, announced late last year that their production would continue on their current pace, coupling that with the current emergence of shale-oil in the Permian basin, and we have an oil surplus. With the price-per-barrel lingering around $50 of late, look for an uptick in mergers and acquisitions in the oil industry around the world.
Industry experts deduce their predictions from analysis and discussions with market decision makers and those in charge of major players in the oil world. Current cost and cash-flow pressures on companies, had led to evaluation of strategic movement into dealmaking. Late last year, announcements had begun with the Halliburton-Baker Hughes merger. This deal is set to be complete this coming summer. Also last year, a deal was made for a Nigerian oil block and pipeline by Royal Dutch Shell to an association led by Taleveras group. Predictions are stating that in the next 6-12 months we may see the most M&A activity in sector.
Firms that are currently weathering the surplus storm, will look to take advantage of their continued cash-flow and leverage their position to acquire companies which seek a lifeboat. Firms that operate internationally will be on the prowl to enhance their portfolios while more local, national firms may be road blocked by their home-country’s agenda.
Keep in mind that with the state of the market sector, those who are in good financial standing have less cash on hand than usual. Any offer or strategic movement will be heavily thought over and carefully planned out. With decreased cash companies will not be letting a penny go to waste.
In all, analysts are stating that deal activity will benefit international and national oil health. This is an industry that has seen slow M&A activity compared to other sectors. New deals may spark a healthier market.
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