Analysts Sanford C. Bernstein & Co. have predicted a rise in mergers and acquisitions (M&A) over the coming year, with a possible recovery in crude prices to follow, reports Bloomberg Business.
Among those making purchases will be national oil companies in Asia, likely including PetroChina Co. and Oil & Natural Gas Corp. of India. In their sights will be Occidental Petroleum Corp., Devon Energy Corp., Genel Energy Plc and InterOil Corp., according a new Bernstein report.
“We expect companies with strong balance sheets and limited organic growth to acquire resource-rich companies with stretched balance sheets,” the analysts wrote. “An increase in M&A activity will be a leading indicator for a commodity price recovery. While we may not quite be there yet, the next 12 months are likely to see an increase in activity.”
Oil prices have fallen more than 50% since June 2014, according to Bloomberg, with OPEC members deciding to sustain output to protect market share. Potential buyers may have been waiting for the market to hit bottom before starting a new cycle of M&A activity.
“History has shown than every major downturn in oil price over the past 50 years has been accompanied by significant increase in M&A activity,” the analysts wrote in the report. “There are tentative signs that the M&A cycle may be starting to turn with increased activity in the sector over the past month.”