Get ready for more oil and gas mergers in our region says top expert
There is a resurgence in takeover activity in the Asia Pacific oil and gas space and investors should brace for more, a market researcher says.
Analyst Wood Mackenzie says more than $US6.8 billion worth of global upstream oil and gas assets have changed hands this year — the most since 2014.
Santos’s (ASX:STO) $US2.2b acquisition of Quadrant Energy accounted for much of that.
“Deal activity in Australia has been led by local players looking to reshape their portfolios to focus on domestic gas demand and future LNG backfill options,” said Wood Mackenzie upstream research director Andrew Harwood.
“We expect to see further liquidity down under, as north Asian buyers seek to secure resources and private equity funds prowl for overlooked opportunities.”
He also says to look out for deals in Malaysia and Indonesia, particularly after the latter’s election in April 2019.
Only Santos operates in Malaysia, according to Makcorp data, but $728m market capped Cooper Energy (ASX:COE) and $7.8m marker capped Bass Oil (ASX:BAS) have operations in Indonesia.
The research house expects continuing Chinese demand for LNG, as it switches from coal to gas, will backstop Asian demand.
A dearth of new LNG projects mean globally companies will be scrambling to get final investment decisions in on new projects and existing producers will be looking for extra gas.
This fact has implications for LNG producers on Australia’s East coast, where LNG producers in Queensland are fighting for gas with domestic users.
The government’s Australian Domestic Gas Security Mechanism is in place to force LNG project to limit exports or find new gas sources in the event of shortfalls in the East coast market.
It also means juniors and mid-tier explorers-cum-producers like Armour Energy (ASX:AJQ), Real Energy (ASX:RLE), Comet Ridge (ASX:COI) and Galilee Energy (ASX:GLL), which are scrambling to find and produce East coast gas, could be potential takeover targets.
It also ups the ante for Northern Territory players, which will soon have access to the East via a new pipeline, due to open in December.