HOUSTON (TheStreet) M&A talk was very much on the minds of executives at Jefferies' energy conference held in Houston last week.
While press wasn't invited, the investment bank revealed highlights from the sessions on Monday, Nov. 18.
Jefferies investment banker Ralph Eads said he expected M&A markets to remain relatively quiet. Though there was, for instance, speculation centering on Irving, Texas-based Pioneer Natural Resources (PXD - Get Report), Eads said he didn't believe the majors are likely suitors for any exploration and production company, nor does he think smaller combinations are likely. He viewed obstacles to deals in the exploration and production sector as no tax step-ups, valuation issues, personnel shortages and shale fatigue. Companies are more likely to embrace "portfolio management" than M&A, with asset rotation being the "new mantra," and private equity as the likely winner, with EnerVest Ltd. of Houston saying deal flow is the highest it has seen, Jefferies noted. Exco Resources (XCO - Get Report) of Dallas, however, expects to close two acquisitions shortly, leading Jefferies to think that sellers of gas properties are finally being more realistic in their expectations. Among the presenting oil service companies, Ensco (ESV) senior vice president of global marketing, Kevin Robert, said the London-based company was "absolutely" still considering acquisitions but hasn't found anything appealing. National Oilwell Varco (NOV) corporate development vice president, Loren Singletary, said the spinout of its distribution business will lead to a "pristine" balance sheet, i.e., more M&A focused, so expectations are that the Houston company will push into industrial as well as more into energy midstream and downstream.
Network infrastructure service provider RigNet (RNET) CFO Marty Jimmerson said the Houston company is looking to branch into mining and general maritime industries within its remote communications niche, which would come via acquisitions rather than through organic initiatives. Houston's Superior Energy Services (SPN) CEO David Dunlap said to expect more international acquisitions to come in the next year or two. Hercules Offshore (HERO) noted that the Houston company needs to reap the benefits of a healthy cash flow outlook through 2014 at the very least to save up for future acquisitions and/or to de-lever.Among the presenting oil and gas explorers, Continental Resources (CLR) president and COO Rick Bott said the Oklahoma City company is identifying bolt-on acreage acquisitions in the South Central Oklahoma Oil Province ("SCOOP") as it continues to look for opportunities to grow its position. Gulfport Energy's (GPOR) investor relations director, Paul Heerwagen, said the company, also of Oklahoma City, is on pace to add 10,000 acres per quarter in new leasing additions in the Utica Shale, which will continue into 2014 with $250 million of leasing acquisitions. Matador Resources (MTDR) COO and CFO David Lancaster said the Dallas company will remain opportunistic in South Texas' Eagle Ford shale as it continues to search for bolt-on acreage acquisitions. Newfield Exploration (NFX) executives said the Houston company plans to close its international divestitures in the second and third quarters of next year with the worst case scenario being late next year noting that work that its technical team is doing might actually raise the value of those deals. Swift Energy (SFY) CFO Alton Heckaman said the Houston company's central Louisiana divestiture will help bridge its cash flow shortfall expected for next year. --Written by Claire Poole in Houston
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