Europe and Asia More Oil and Gas Shale Development Expected in China, France, Poland and South Africa; Higher Gas Prices Attract Producers To Previously Untapped Formations.
67 WALL STREET, New York - January 9, 2012 - The Wall Street Transcript has just published its Oil an Gas: Refining, Independent and Major Integrated Report offering a timely review of the sector to serious investors and industry executives. This special report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available via The Wall Street Transcript Online.Topics covered: Narrower Trading Range for Oil and Gas - Capital Expenditures and Consolidation Activity - Refining Crude Price Differentials - Frontier Exploration and DevelopmentCompanies include: Anadarko (APC); Apache (APA); Atlas Energy (ATLS); BHP (BHP); BP (BP); Chesapeake (CHK); Chevron (CVX); Comstock (CRK); Conoco (COP); ExxonMobil (XOM); Fairborne (FEL.TO); Halliburton (HAL); Hes (HES); Kosmos (KOS); Marathon Oil (MRO); Murphy (MUR); Natural Resources (CNQ); Occidental (OXY); Petrobras (PBR); Schlumberger (SLB); Shell (RDS-A); Statoil (STO); Transocean (RIG) and many more.In the following brief excerpt from the Oil and Gas: Refining, Independent and Major Integrated, expert analysts discuss the outlook for the sector and for investors.Pavel Molchanov joined Raymond James and Associates, Inc., in June 2003 and began work as part of the exploration and production research team, becoming an Analyst in January 2006. He initiated coverage on the alternative energy sector in fall 2006 and the integrated oil and gas sector in mid-2009. Mr. Molchanov has been recognized in the StarMine top analysts survey, the Forbes Blue Chip Analyst survey, and The Wall Street Journal Best on the Street survey. He graduated cum laude from Duke University in 2003 with a B.S. in economics. TWST: You also said in our last interview that the integrated majors are doing more frontier exploration, which they previously had left to the smaller companies. Given that, what's the outlook for M&A in this space in 2012, and may we see some private companies go public after a significant discovery?Mr. Molchanov: Well, M&A has been active in the last 12 months, although there weren't any megadeals along the lines of XTO being bought by ExxonMobil (XOM) in June of 2010. There have been no mega-acquisitions like that in 2011. But there have been certainly some interesting deals, such as Petrohawk being bought by BHP Billiton (BHP) from Australia. Why is this interesting? Well, the premium that Petrohawk was bought out for was huge. BHP Billiton really paid a very generous price. And also BHP Billiton is better known as a mining company, though it has a growing oil and gas business, and this is BHP Billiton's attempt to establish a strong foothold in the United States. Of course, it's an Australian company with global operations, but it's making a big bet on natural gas in the United States even though natural gas in North America right now, to say the least, is in rather rough shape. This is a bet for the long run much as Exxon made a bet with XTO in 2010.Earlier this year, Chevron (CVX) made an acquisition of Atlas Energy (ATLS), which was also a natural-gas-focused company in the United States. A small deal within the context of Chevron, it was a $4 billion purchase, so about one-tenth the size of the XTO acquisition. But still, what it tells us is that many of the megacaps are willing to make a bet that natural gas in North America will ultimately become a more profitable business.There is one other element to both the BHP deal and the Chevron deal, as well as XTO from last year, that is very important. There is one rationale for doing these deals that has nothing to do with North America, and that is the development of a skill set for unconventional gas that can be redeployed to other geographies. What's interesting is that there is more shale gas in China than there is in the United States. Some of the other large countries with significant shale gas resources that don't normally come to mind are countries like France and Poland and South Africa.These are not countries where there is a shale gas industry today, but they have a great deal of resource. So in one sense, going back to our discussion of frontier exploration, this is one kind of frontier exploration. For example, there is some oil and gas being produced in Poland, but it's not from shale. And what megacaps like Chevron or Exxon or BHP are interested in doing is learning the skill set of developing shale gas, and the only part of the world where it's being produced today is North America. And then they can take that skill set and transfer it to overseas markets such as the ones I just listed, where the economics of natural gas typically are a lot better than they are here. And even though these companies are not necessarily making a return on their U.S. gas assets at the moment, if they can learn a skill set and deploy it abroad, then that could make the acquisitions worthwhile too.The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. 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