M&A in the oil and gas sector could pick up in the second half of the year with higher oil and gas prices and potential takeover targets could include Concho Resources (CXO) , Whiting Petroleum (WLL) , Oasis Petroleum (OAS) , Range Resources (RRC) , Antero Resources (AR) and Anadarko Petroleum (APC) , bond research firm CreditSights wrote in a report released Tuesday.
Anadarko could also be an acquirer in this consolidation phase, analyst Brian Gibbons told TheStreet. "Single basin players with low cost structures and relatively modest leverage will be most attractive to peers of equal or larger size," he said.
M&A activity will be helped by rising oil prices, which have stayed above $40 per barrel for the past six weeks, and increasing natural gas prices, which have remained more than $2 per thousand cubic feet equivalent over the last seven weeks, Gibbons said. He also noted strong gains for energy equities and credits as investor sentiment has lifted.
The industry is in the midst of a major transition from expansion mode to contraction and consolidation, which he expects will include a mix of large scale mega-mergers and acquisitions and will cut across sub-sectors, including integrated oil and gas companies, exploration and production companies and national, or state-owned, oil companies. "We would not be surprised to see an integrated oil [company] make a run at a large-cap E&P or large cap E&P's announce mergers of equals," he said.
Gibbons said smaller scale deals also will continue to be robust, such as Range's recent $3.3 billion purchase of Memorial Resource Development (MRD) , which may have signified that the tide is turning, as will asset sales. He also thinks private equity buyers will be active in the market.
Global oil and gas M&A activity is off to its weakest yearly start since 2005 with only $46 billion worth of deals announced across 376 deals, Gibbons said, citing Dealogic data. But he expects global deal activity to reach $285 billion this year ("it will clearly take some mega-mergers to get there," he said), an 18% decline over last year. In the U.S., there has been only $27 billion in M&A activity in the first five months of the year and he anticipates $110 billion for 2016, a 32% drop over last year.