Australia: Gas deals heat up with billion dollar merger

Australian oil and gas producers Beach Energy and Drillsearch Energy Ltd agreed to a billion dollar merger on Friday, the day after Santos rejected a $5 billion offer, signalling the industry’s fortunes may be bottoming. The pace of deals in the sector has picked up as a slump in oil prices since June last year has battered share prices to such weak levels that companies and assets are proving irresistible to buyers with sufficient funds.

“Here it’s been a particularly painful year for (energy) equities, which has generated once-in-a-cycle type opportunites for people with a more bullish long-term view on oil prices,” said Adrian Prendergast an analyst with Morgans in Melbourne. Analysts said the string of bids over the past month, including Suncor’s C$4.3 billion bid for Canadian Oil Sands, suggested acquirors see oil prices bottoming as supply comes out of the market, especially in the United States.

“It does provide some indication the industry thinks it may miss the opportunity to transact in this recent oil price rout as people in the market have become more positive about oil prices next year,” said Scott Simpson, an analyst at GMP Securities in Perth. The Drillsearch-Beach merger followed a A$7.1 billion ($5.2 billion) bid for Santos from a firm backed by the royal families of Brunei and the United Arab Emirates and an A$11.7 billion bid by Woodside Petroleum for Oil Search Ltd.

Full content: The Sydney Morning Herald

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