AUSTIN, Texas, Jan. 7 /PRNewswire/ -- Bender Consulting, a premier boutique consulting firm, today announced its predictions for key trends and merger and acquisition (M&A) related activity that will have the biggest impact on the oil and gas sector for 2010. Bender Consulting combines proven industry experts and world-class consulting resources to execute complex transformation initiatives for High Tech, Energy and Bio Tech clients. The talent at Bender Consulting has been involved in major mergers, acquisitions, deals and restructuring for many years. John Bender, managing director and founding partner of Bender Consulting, was a key player in the HP-Compaq merger in 2001.
"We expect 2010 to be an exciting year in the energy sector," said Jonathan Dison, managing director and partner for Bender Consulting. "Climate legislation will continue to be a key issue for all the energy companies - both upstream and downstream. Additionally, we expect to see acquisitions similar to Exxon's purchase of XTO Energy as the year unfolds."
Key M&A Trends for the Oil and Gas Sector in 2010:
- Acquisition of Proven Reserves:
- Supermajors will look to buy reserves in 2010. U.S.-based reserves will be particularly attractive - and will cause a premium price, similar to the XTO purchase by Exxon.
- Natural gas will be an increased player in the nation's energy future and will be an acquisition focus. The same holds true for the oil sands in Canada.
- Devon is still a likely target for Exxon because the belief is Exxon will have the cash to expedite exploitation of the reserves.
- Smaller private equity money will begin to flow back into the upstream market (increasing throughout 2010). Capital markets will continue to loosen during 2010.
- Carbon Legislation Plays a Role:
- A cause for increased acquisition activity on the upstream side.
- On the downstream side, it will cause uncertainty - and a "wait it out" mentality. Cap and trade could lead to distressed downstream assets on the market - Valero, Sunoco, Tesoro and other independent refiners could be acquired.
- U.S. supermajors will not likely increase acquisition of foreign downstream assets. Far reaching legislation could push supermajors toward exiting the downstream business - or drastically optimizing it to maintain outlets and full value chain insight.
- "Shrink to Grow" Downstream Mentality:
- Supermajors will continue to optimize and reduce downstream headcount and markets of operation. Result will likely be net job loss.
- While tight margins and cap and trade complexity will push supermajors to strongly consider exiting the downstream business, our prediction is that they will remain in order to maintain their brand and knowledge gained from exposure to the full value chain. We anticipate that they will look to build capability to further exploit "full value chain knowledge" for profit (ex: increased trading for profit; strategic market acquisition, etc).
- ConocoPhillips will not be acquired. New international refining capacity (China and India) will continue to squeeze refining margins. Again, combining this with the "unknown" of cap and trade creates an environment of too much complexity to acquire new downstream assets.
- Independent Refiners (Valero, Sunoco, Tesoro, etc.) could be in trouble. Depending on the degree of cap and trade legislation, this current business model may require drastic transformation or it could become extinct. It's hard to see how they could survive significant legislation.
- Reducing Risk is a Priority:
- Trading value at risk (VAR) exposure will be minimized in 2010 as executives do not truly understand trading and will look to minimize exposure.
- As usual - the oil and gas industry will be behind any economic upswing.
Jonathan Dison continued, "It will be interesting to see what happens with independent refiners, such as Valero, Sunoco and Tesoro. Significant carbon legislation could be extremely harmful and unsustainable for their current business models."
About Bender Consulting
Bender Consulting is a specialized management consulting firm helping High Tech, Energy and Bio Tech clients efficiently complete complex business transformations involving strategy, organizations, processes and systems. Their unique business model gives clients access to experienced CxO's, E/VPs, and directors - along with some of industry's best consulting resources - for less cost than other firms. The company was founded in 2004 and has offices in Austin, Houston and the Bay Area. For more information, visit: www.bendercon.com
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