Business | Oil & Gas
Anadarko and Dana likely acquisition targets
Smaller producers are more vulnerable to takeovers as oil stocks trade close to their lowest in four years.
- Bloomberg
- Published: 00:11 November 11, 2008
Dubai: Anadarko Petroleum Corp and Dana Petroleum Plc, oil drillers that lost more than 30 per cent in market value this year, may become acquisition targets as they show it is cheaper to buy oil and gas reserves than to go and find them.
Anadarko's proven deposits have a stock market value of $6.99 a barrel after its shares tumbled 45 per cent this year in New York trading, while Dana's are at $7.80 a barrel.
That is more than 39 per cent below the $12.87 a barrel Royal Dutch Shell Plc spent last year to find and develop its own fields, data compiled by Bloomberg show, and may attract offers.
ExxonMobil Corp, Shell, BP Plc, Chevron Corp and Total SA, the largest non-state oil companies, held $82 billion of cash at the end of September, enough between them to acquire seven of the 11 members of the Standard & Poor's 500 Oil & Gas Exploration & Production Index. Smaller companies such as Talisman Energy Inc. may also have funds for acquisitions.
"It's cheaper to buy a barrel on Wall Street instead of a barrel that companies need to find and develop," said Andrew Bartlett, global head of oil and gas corporate advisory at Standard Chartered Plc in London. "Companies with cash are looking for infill-opportunities with a large resource base."
The last time oil plunged, when crude fell to $10 a barrel in 1998, led to a transformation of the industry as BP bought Amoco Corp, Exxon acquired Mobil Corp. and Total Fina SA took over Elf Aquitaine SA. Deals now are for niche targets.
"It may prove better value to buy than to build over the course of the next 12 to 24 months," Talisman chief executive officer John Manzoni said on November 4. BP CEO Tony Hayward said on October 28 the credit crisis may create opportunities which BP would look at "very closely". As oil stocks trade close to their lowest in four years, smaller producers are more vulnerable to takeovers.
Tumble
The 224-member Bloom-berg World Oil and Gas index tumbled 45 per cent this year as crude declined 59 per cent from its July record of $147.27.
International oil companies are seeking reserves as decades-old fields from the North Sea to Alaska dry up and as producing nations keep their best resources and more profits for themselves.
Analysts say targets include Texas-based Ana-darko, the second-largest independent US oil and natural-gas producer. It's among 25 companies with the lowest ratio of reserves to market value on the World Oil & Gas index.
Dana Petroleum produces oil in the North Sea and explores in Africa. "Dana benefits from an attractive combination of asset backing, exposure to exploration upside and takeover risk," Jessica Saadat, oil analyst at Cazenove, wrote in a report on October 21.
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