Goldman: Lookout for M&A in the oil industry

Goldman Sachs research team has released a note on the oil market, predicting oil will stay at lower levels for the rest of the decade and that M&A activity will rise. “We believe the decline in oil prices and potential lower-for-longer environment will drive increased M&A activity over the next 12 months ... Super Majors have the cash and are likely potential consolidators ... Companies with strong assets/weak balance sheets that do not have advantaged costs of capital should sell. Those with weaker assets/strong balance sheets should buy. Companies with strong assets/strong balance sheets should go it alone or issue equity. And those with weak balance sheets/weak assets should consider wider options...History suggests M&A activity picks up during periods of commodity weakness. Our analysis of past cycles shows transactions increased at periods where it appeared the market had bottomed and a recovery was in sight. Stocks under coverage with M&A components in price targets include Buy-rated ATW, RES and Neutral-rated OII, RDC.” (Source: Bloomberg)