Oil Price Stabilization Means Influx in M&A Activity

Jul 18, 2016, 09:00 ET from FinancialBuzz.com

NEW YORK, July 18, 2016 /PRNewswire/ --

Current oil prices have substantially recovered as compared to its $25-$30 lower levels in first quarter of this year, to the current levels of $45-$50 by the 2nd quarter. The increase in price per barrel has given a boost to the straggling companies in the oil and gas sector. As a result, total global spend on upstream M&A deals rose significantly, as companies started to take advantage of the revival in the sector. International Western Petroleum, Inc. (OTCQB: INWP), Range Resources Corp. (NYSE: RRC), Chevron Corporation (NYSE: CVX), Exxon Mobil Corporation (NYSE: XOM), Marathon Oil Corporation (NYSE:  MRO)

The oil and gas industry is divided into three major sectors: upstream, midstream and downstream. The upstream oil sector is also commonly known as the exploration and production (E&P) sector. According to data provided by the Oil & Gas Financial Journal, Q2 upstream deals were worth a combined $25.6 billion, up from $18.5 billion in Q1, an encouraging 38% increase.

Smaller companies have been more active in domestic acquisitions. International Western Petroleum, Inc. (OTC: INWP) just announced that it has executed a definitive Purchase and Sale Agreement to purchase all assets of a privately held Houston-based exploration and production company in the Texas Gulf Coast region. International Western Petroleum, Inc. will also assume the Seller's position in its acquisition targets of some 55,000 acres and 258 wells (59 active) with current production of 400 bopd and 8700 mcfpd gas. The second phase of acquisitions, which is scheduled for September 30, 2016, will provide a total of $17.2 million of which $8.5 million will be spent in acquisition cost and $8.7 million will be spent in development cost. The last phase of acquisitions, which is scheduled for November 30, 2016, will provide a total $26 million of which $20 million will be spent in acquisition cost and $6 million will be spent in development cost.

International Western Petroleum, Inc. continued on stating that, "proven reserves of the combined entity upon acquisition is estimated by reputable third party engineering firms DeGolyer McNaughton, Ralph E Davis & Associates, American Energy Advisors and Netherland Sewell & Associates at 5.615 million bo proved and 111.8 BCF gas or $129 million PV10% and $201 million undiscounted."

Earlier in May, Range Resources Corp. (NYSE: RRC) said it agreed to buy competitor company Memorial Resource Development Corp. in an all-stock deal valued about $3.3 billion. Shares of Range Resources Corp. have increased 75% year to date.

Larger companies, on the other hand, have been focusing on development of projects overseas, investing large amounts of money in them. Chevron Corporation (NYSE: CVX) for example, announced recently a $36.8 billion expansion of the Tengiz oil project in Kazakhstan. Shares of Chevron increased in value by 19% since the beginning of the year.

Exxon Mobil Corporation (NYSE: XOM), is partnering with Qatar Petroleum acquiring energy assets in Mozambique, which currently has some of the biggest natural-gas discoveries in a generation. Naturally foreign companies and investors are attracted. In addition, on July13th it was reported that ExxonMobil offered to buy InterOil Corp. topping the previous bid $2.2 billion. Shares of Exxon surged 22% year to date.

Marathon Oil Corporation (NYSE:  MRO) also recently announced of an important acquisition. The company will acquire PayRock Energy Holdings LLC for $888 million. The acquisition adds to Marathon's portfolio of properties in the Oklahoma area. Shares of Marathon are up 20% year to date.

To witness the recovery of the US upstream sector, and the data on global spend on upstream M&A is an encouraging sign to investors. It is very active virtually across the whole board and with players on both the buy and sell sides.  

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