With the week that brought the biggest oil merger ever drawing to a close, the race is on to pick the next set of Big Oil soulmates. But the merger-mania race looks more like a marathon than a 100-yard dash.

The proposed $48 billion acquisition of

Amoco

(AN) - Get Report

by

British Petroleum

(BP) - Get Report

, announced Tuesday, is putting pressure on other oil producers to at least consider deals. And the media is hyping it up, throwing out names like yesterday's garbage.

There are good strategic reasons to merge, including increasing market share, reserve potential and leverage. The landscape continues to change for major oil companies as they assess a variety of options designed to cut their cost structures and increase cash flow, especially during a time of weak oil prices.

The name of the game in oil is to replace reserves as cheaply as possible, says Leigh Goehring, manager of the

(PRGNX) - Get Report

Prudential Natural Resources fund. In some cases, it's less expensive to acquire reserves than to find them.

But continued consolidation among the majors may not happen so quickly.

"More mergers could happen but to think we could get announcements next week is premature," says Steven Pfeifer, who covers major oils at

Prudential Securities

in New York.

For one thing, some companies have been getting along just fine by forming joint ventures. Michael Mayer, a managing director at

Schroder & Co.

, contends that cost savings from joint ventures rival those that stem from mergers. Look at the joint venture between

Mobil

(MOB)

and BP, which combined their European downstream operations. It brought in savings of between $600 and $700 million dollars, Mayer says.

Indeed, in many cases a merger simply brings a "one-time exercise in cost-cutting," says Goehring at Prudential. "When it's all said and done you have one big oil company instead of two," he says. "You still have the problem that these stocks are overvalued. You're paying 20 or 25 times earnings for these stocks in a bad upstream environment and a developing bad downstream environment."

Downstream, or refining, margins have been holding big oil stocks up for a couple of quarters, masking the terrible performance of oil companies' exploration and production arms, but it won't last, he says. Refineries have been running at peak capacity, taking advantage of lower crude prices, but the net effect is bulging inventories.

For another thing, BP is possibly overpaying to buy Amoco's reserves, says Mayer. His rough estimate is that BP is paying $32.5 billion for Amoco's upstream assets. Dividing that figure by Amoco's total reserves at the end of 1997, he comes out with a price of $5.81 per barrel of oil equivalent, which includes oil and gas. Considering that the average cost of finding and developing reserves of the 15 largest oil companies for the five years ending in 1997 has been $4.40 per barrel, he says "it's a very full price."

Given that, Mayer is "hard-pressed to say you're on the cusp of a big wave of mergers in the oil industry based on the premium BP paid to buy those reserves. BP has obviously bought into the notion that as a strategic imperative they want to be a much larger company."

Still, other companies may agree with the bigger-is-better notion, which will "force feed the potential for at least some additional major amalgamations," says George Gaspar, a managing director at

Robert W. Baird

in Milwaukee.

The most likely pairings involve international buyers with domestic sellers, says Pfeifer at Prudential.

Investors already are making plays on the sector, driving shares of favored candidates up.

Mobil

(MOB)

jumped from 64 1/8 Monday to close at 72 on Friday -- a gain of 11% on merger rumors.

With its market cap of $54 billion, long-term debt of just 15%, and 1997 revenues of $66 billion, Mobil should be able to pick its partner. Yet it reportedly has held talks with both BP and Amoco but to no avail. The latest rumor coming out of Houston on Thursday was that Mobil may want the much smaller

Kerr McGee

(KMG)

. Kerr McGee, which generates cash flow per share of $8.25 and has a trailing price-to-earnings ratio of 18, is considered seen as an attractive buyout candidate.

Phillips Petroleum's

(P)

stock gained 8% this week through Friday, to end the week at 44 7/8. Phillips has a market cap of just under $12 billion, 1997 revenue of $15 billion, and a trailing P/E of 16 -- one of the lowest among the big oils. Phillips' percent of long-term debt to capital, at 38%, is relatively high, while its cash flow per share generated -- at $6.25, is above average.

Chevron

(CHV)

gained 5.5% to end the week at 80 1/8. Its name has been linked to a possible combination with

Texaco

(TX) - Get Report

. Chevron's market cap is $52 billion and its 1997 revenues totaled $42 billion.

Some investors believe Chevron is overvalued at a trailing P/E of 22.

Texaco managed a gain of nearly 7% -- it closed out the week at 60 5/16. Texaco's market cap is smaller than Chevron's at $32 billion, but its 1997 revenues, at $47 million, beat Chevron. Analysts say Texaco is positioned for strong growth both in its production volume and profit margins. A merger with Chevron would be a merger of equals, and bring the company much closer in size to BP-Amoco.

Unocal

(UCL)

, an $8 billion company with 1997 revenues of $6 billion, may seek to sell itself to gain leverage and market power. It's up just 5% for the week, to 33. Its trailing P/E is 22. With its 52% debt level, and continued weak earnings outlook due to operating shortfalls in the recent quarter make it a likely target.

On the indy oil front,

Sonat

(SNT)

made some ripples in the options market Friday, where its calls got busy behind a 9.5% jump in the shares. With the exploration company's stock at 32 3/8, volume on its August and September 30 calls reached a combined 518 contracts. While that number may not seem impressive at first glance, compared to its normal volume of around 200 contracts a day overall, the renewed interest in the company becomes more obvious.

The prices of those options also rose commensurate with the stock move, with the August 30 calls jumping 2 1/4 ($225) to 3 ($300) and the identical September contract moving 1 3/4 ($175) to 4 1/8 ($412.50). The implied volatility -- the measure of the stock's expected trading range -- hit the 80 level Friday, up drastically from the high 20s where it usually resides.