Early movers have best chances for M&A

Market could be ready for M&A activity, according to a report

Deals could be on the way.
Deals could be on the way.

Despite months of declining commodity prices, investors are now poised to capture opportunities in the energy market as speculation continues to drive equity markets, according to Wood Mackenzie.

Shares of US firm Goodrich Petroleum jumped 17% after the company announced plans to move forward with two completions in the Tuscaloosa Marine Shale.

Penn Virginia also recorded price fluctuations after an unsubstantiated report claimed the company rejected an unsolicited takeover attempt by BP.

“With oil prices hovering at $60/bbl and the rig count starting to plateau, general consensus among investors signals that we are near an inflection point of a sustained price recovery,” said the report.

“From a valuation perspective, Wood Mackenzie believes the window of opportunity to complete deals at 'fair market' valuations will be short-lived, as equity markets will begin pricing in improved outlooks 12 months from now.

“Assuming that the consensus scenario plays out, early movers have the best chance of creating value through acquisition. See M&A at $60 – the buying window opens.

“The Permian's Delaware Basin is a growing target for M&A activity, with the southern plays generating interest from both potential new entrants and Permian veterans.

“While acreage valuations in the Midland Basin skyrocketed in 2014 with the rise of the Wolfcamp, Delaware Basin valuations are still reasonable enough for buyers to create value.”
 

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