DealZone

Is oil heating up?

July 10, 2009

oil1Energy M&A has heated up over the past few weeks, with two large deals possibly on the horizon: the sale of Repsol’s Argentine unit YPF as well as Kosmos Energy’s stake in the Jubilee oil field in Ghana.

If thise deals would happen, it would follow Suncor Energy’s $20 billion takeover of rival Petro Canada, announced earlier this year.

So is M&A in the oil sector heating up? Maybe, but insiders warn that the fluctuations in oil and gas prices could slow the flow of deals.

Historically,  crude oil has tended to trade between 9 to 11 times natural gas prices.  But with crude at around $60 a barrel and natural gas at around $3.35 per million british thermal units, that ratio is currently 18 times natural gas prices.

That suggests gas prices will go up or crude prices will go down. If oil prices drop, then assets that on the market could be pulled, and the M&A market could cool fast.

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