April 8, 2015 started out like any typical day for most of us.
At least, it was normal until news hit the wire that Royal Dutch Shell was ready to dish out £47 billion to take over BG Group. And in case you were wondering, this was the largest takeover in the oil sector in the past decade.
It’s the largest since Royal Dutch merged with Shell Transport & Trading back in 2004.
In fact, Shell’s takeover of BG in April ranks as the biggest M&A deal in history.
Of course, shareholders of BG woke up that morning to an instant 27% premium on their shares.
So what compelled Shell to make such a bold move?
The simple answer: opportunity.
And they’re not the only ones looking for a good buy in the energy sector.
Buy, Buy, Buy
There’s a mantra going around lately that we can’t ignore any longer: Snap up the oil patch!
Well, that’s not entirely accurate.
You see, M&A activity in the oil and gas industry hit a bit of a rough patch during the first quarter of 2015. During the quarter, approximately 39 oil and gas deals over $50 million were made for a total value of $34.5 billion. This represents a sharp 44% decline compared to the roughly 70 deals that were made during the first quarter of 2014 (which were valued at about $103 billion).
As you might’ve guessed, the decrease in activity was largely due to the oil price crash in the latter half of 2014.
Then again, 2014 set some pretty high standards; last year was record-breaking for mergers and acquisitions, with oil and gas deals totaling $321.5 billion.
Things were a little better during the second quarter, with approximately $115 million in E&P deals, led by Royal Dutch Shell’s takeover of BG Group.
But now that oil prices have stabilized somewhat after bottoming earlier this year, there’s a good chance we’ll see M&A activity in the oil and gas industry jump during the second half of 2015.
So who’s next?
Some of you might recall the rumors that surfaced last year of BP being bought out by Exxon. Whether or not the Macondo-cursed company is actually bought out remains to be seen, but that doesn’t mean there aren’t other targets available.
Truth is, there are better fish in the pond, and it’s not just Big Oil that’s gearing up for a spending spree…
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Follow the Big Money… Capitalize on the Opportunity
When in doubt, follow the money.
Since 2009, private equity funds have raised more than $157 billion for energy-related investments — that’s not exactly chump change we’re talking about.
Yet there’s a kicker here…
After watching oil prices plummet more than 57% from August of 2014 through January, you can bet these firms are salivating at new opportunities.
Remember, the low oil price environment is putting a lot of stress on upstream companies, and the fact that we’ve seen market capitalizations decline precipitously since last summer means there are a host of undervalued gems out there.
As it stands now, the private equity industry has earmarked over $40 billion for these upstream deals.
It’s even bigger than that, too.
When crude prices started to tumble, you can bet a lot of these deals were sidelined. So when crude prices rally later this year and into 2016, expect to see M&A activity ramp up.
In other words, these equity firms hold the exact same bullishness over oil and natural gas as we do. That is, this downturn in energy prices is only for the short term.
So how do you capitalize on this burgeoning opportunity?
Simple: You have to be one step ahead of the Big Money. And to help you navigate the upcoming wave of M&A activity, I’ve put together a detailed report for my readers that identifies three of those undervalued gems in the U.S. oil patch.
Keep an eye out for my report to hit your email inbox on Thursday morning.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.
