Addax - HEARD ON THE STREET: Majors Sitting Out Energy Deals
HEARD ON THE STREET: Majors Sitting Out Energy Deals
Last Update: 6/9/2009 2:57:26 PM
By Liam Denning
A DOW JONES COLUMN
Amid rising energy prices, the sector's dormant mergers and acquisition market is
waking up. About $10 billion worth of announced and rumored transactions have
surfaced this week.
It's life, but not as we know it.
Two situations involve Iraq. London-listed Heritage Oil (HOIL.LN) is merging with
Turkey's Genel Energi AS to form the largest exploration and production company
focused on the Kurdish region of Iraq.
Heritage is paying roughly $2.6 billion in stock, which has trebled in value
since the start of the year. In return, it gets cash flow from Genel's producing
fields and, with a pro forma market capitalization of more than $5 billion,
according to RBC Capital Markets, also a shot at joining the FTSE 100 index.
Meanwhile, several Chinese and South Korean state-linked companies are said to be
sniffing around Canada's Addax Petroleum (ADXTF), worth C$6.7 billion and active
in Iraq's Kurdish region and West Africa. The Chinese, in particular, want direct
access to energy sources and enjoy support from a wealthy government.
The international oil majors are conspicuous by their absence. They have good
reason to avoid Kurdistan, however. Foreign companies entering into deals there
risk being blacklisted by Baghdad for bigger potential transactions elsewhere in
the country.
The majors are also absent from a couple of recent deals in the U.S.
unconventional natural gas sector, the latest being Kohlberg Kravis Roberts &
Co.'s $350 million investment in privately-held East Resources Inc.
For the majors, such deals are too small to move the needle. Meanwhile, the
recent run-up in commodities prices has taken financial pressure off some of the
larger prey they might target. If anything, a little cooling off in energy
markets might help kick off more deals.
(Liam Denning joined The Wall Street Journal from the Financial Times, where he
wrote for the Lex column. Previously, he was an investment banker at Goldman
Sachs. He can be reached at 212-416-3618 or by email at liam.denning@wsj.com)
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(END) Dow Jones Newswires
June 09, 2009 14:57 ET (18:57 GMT)
