Small companies set for takeover

More and more small oil and gas companies on the Australian Securities Exchange are going to be on the auction block as bigger companies look for takeover opportunities.

According to Canaccord Genuity, more companies will be the target of takeover opportunities given higher operating costs, a relatively high oil price and increasing domestic gas prices.

The Australian reported that Canaccord’s oil and gas analyst Johan Hedstrom said takeovers were going to be more common based on the falling share prices of smaller companies.

“There is more takeover activity in oil and gas because the share prices have fallen, yet the oil price is $100 plus and gas prices in Australia are rising,” he reportedly said.

“This is unlike other commodities like iron ore, copper and gold, which have been under sustained pressure.”

The Karoon Gas and Origin takeover deal announced this year set the scene for more takeovers.

This also includes the Horizon Oil and Roc Oil merger, the all scrip takeover by Drillsearch Energy for Ambassador Oil & Gas and the takeover of Aurora Oil & Gas by Canada’s Baytex Energy.

“There is going to be speculation about more activity because so many companies’ prices have become irrelevant for investors. Mergers produce scale which will attract institutions,” Hedstrom said.

He added that Beach Energy, Drillsearch and Senex Energy are hot targets for takeover because of their involvement in the shale gas industry in the Cooper Basin.

Smaller companies like Cooper Energy, Sundance Energy and Lonestar Resources are also expected to be on the market.

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