The plunge in the oil price to a five-year low may trigger a new wave of mergers and acquisitions in the United States energy sector

The plunge in the oil price to a five-year low may trigger a new wave of mergers and acquisitions in the United States energy sector. Highly leveraged and smaller producers struggling to cope with the oil price below $US70 ($84) a barrel could be forced to divest assets to remain financially viable... Experienced US energy companies had factored into their business plans the possibility of sharply lower oil prices. However, newcomers to the US shale boom have borrowed large sums of money to finance their land purchases and drilling. John Howell, chief executive of Houston-based advisory firm Portfolio Decisions, said some oil firms required prices above $US80 to $US90 to afford their capital expenditure programs and debt repayments. There a lot of these companies who are leveraged as high as they can go, he said. I think you will see a bunch of companies with fairly strong balance sheets start looking to be acquirers. They're going to be gobbling them up at lower prices. Full article via The Australian Financial Review (paywall) (VIEW LINK)


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