Fresh M&A Wave May Wash Over Gulf E&P

A word of caution: Playing equities on the potential of a deal can be risky. Remember, there is no deal between Woodside and Energy Partners, and there is a realistic possibility that one won't get done.

Even once deals are announced, conditions can be dangerous for investors. Just ask the arbitrage players who were short Energy Partners and long Stone Energy on Monday before the Woodside deal was announced. Let that be a lesson to those who believe they can simply follow the "smart" money to make money. Longtime readers of this column know I have always espoused taking profits on deal moves rather than hanging around in a position for the morsels. That strategy would have saved plenty of headache in this case.

A Sea of Opportunities

In addition to the intrigue the Woodside bid provides for EPL investors, it also signals the continued interest in the Gulf of Mexico from seasoned energy explorers. That is especially true when one considers that the bid comes at the apex of hurricane season, when the risks to energy production are greatest.

That leads to the question: What other Gulf of Mexico-focused companies might benefit from the newfound interest in Gulf assets? While exploration and production mergers rarely establish trends, it is smart to think about who else has assets that might be attractive to others.