Welcome to Mergermarket's ninth annual Energy Forum.
At the recent USD 50 per barrel (bbl) range, oil has roughly doubled its 13-year low set earlier in 2016. Short run stability in market equilibrium is in large thanks to tightening production from US producers and OPEC members. Investors have become confident in high yield energy firms that have withstood default, but lacking sales growth, executives and activist shareholders will look to expand via M&A. One daunting byproduct of M&A activity is the increased risk of default as lower rated companies cash flows are burdened by higher leverage. Will the default rate increase as time goes on?
Oilfield service companies are now facing the prospect of industry consolidation and are beginning to defend market position by deepening their respective specialty services even further. With upstream production returning to profitability under the USD 40 - 50/bbl price environment and major cost cutting complete, firms will look to grow via M&A. While Wall Street has loosened the purse strings a bit, financing these acquisitions will require creativity as many oil & gas companies still remain on bankers' Do Not Call list. Here, private equity firms see an opportunity to cash in on certain post-bust survivors by providing acquisition and growth capital.
This year's Mergermarket Energy Forum will provide greater perspective on various subsectors, financing trends, and basin activity that weigh greatly on the minds of M&A teams.