"The firms that are most likely to be willing to sell are those with relatively heavy debt loads. Firms that took on a lot of debt when times were good are going to find themselves hard-pressed to pay off that debt in the future."
In spite of all the talk about the fall in oil prices leading to greater mergers and acquisitions activity, so far the sector has been relatively quiet in 2015.
When word broke earlier this year that Whiting Petroleum was possibly up for sale, many market commentators thought that would herald the start of more intense M&A activity. Half way through the year, that has not been the case. Instead, there seems to be a disconnect between buyers and sellers on price. That disconnect can be partially alleviated with stock-for-stock deals, but for now, many parties seem content to wait for stabilization in oil prices before making any deals.
Once oil prices do stabilize though, there will likely be two types of deals. First, megadeals like that between Haliburton and Baker Hughes are still going to remain attractive for many firms. ExxonMobil has been cited as a likely buyer of various other major international oil companies as the synergies would be enormous. ExxonMobil also has plenty of cash, and its CEO Rex Tillerson is facing mandatory retirement.
Related: U.S. Oil Glut An EIA Invention?
Tillerson may be looking to improve his reputation with shareholders after some notable issues at the firm in recent years, and a transformational deal could do just that. Premiums in these kinds of megadeals would likely be small though since the purchase price on an integrated oil major is so large.
The second type of M&A deal that could see increased traction once oil price volatility subsides are the small ‘bolt-on acquisitions’ of small and mid-sized U.S. fracking firms. These firms have resources that many large companies covet and the oil price collapse provides a good opportunity in that regard. The firms that are most likely to be willing to sell are those with relatively heavy debt loads. Firms that took on a lot of debt when times were good are going to find themselves hard-pressed to pay off that debt in the future.
Partial from article on yahoo
for what it is worth ?
Update Regarding Previously Disclosed SEC Investigation
As disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, the Company's management, under the supervision of the Company's Chairman and Chief Executive Officer and its Chief Financial Officer, assessed the effectiveness of the Company's internal controls over financial reporting as of December 31, 2014 and concluded that it was effective. Additionally, the Company's independent registered public accounting firm audited the effectiveness of the Company's internal controls over financial reporting as of December 31, 2014 and expressed its opinion that the Company maintained, in all material respects, effective internal controls over financial reporting as of December 31, 2014, as set forth in the report of the independent registered public accounting firm included in the Company's 2014 Annual Report on Form 10-K.
As previously disclosed by the Company in its public filings with the SEC, including the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015, on March 24, 2015, the Company received a "Wells Notice" from the staff (the "Staff") of the SEC's Division of Enforcement stating that the Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company. The Wells Notice was received by the Company following an investigation by the Staff regarding the Company's internal controls, change in outside auditors during 2012 and 2013, and public statements to investors. The Wells Notice issued to the Company states that the proposed action against the Company would allege violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as amended (the "Securities Act"), and Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rules 13a-l, 13a-13, and 13a-15(a) promulgated under the Exchange Act. Certain indiv
Form 8-K for MAGNUM HUNTER RESOURCES CORP
Regulation FD Disclosure, Other Events, Financial Statements and Exh
Item 7.01 Regulation FD Disclosure
Dismissal of Class Action Securities Case
As previously reported by Magnum Hunter Resources Corporation (the "Company") in its filings with the Securities and Exchange Commission (the "SEC"), including the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, certain class action complaints had previously been filed against the Company and certain of its officers relating to the alleged accounting issues further described below. In late 2013, the class action cases that remained outstanding were consolidated into one action in the United States District Court for the Southern District of New York. This consolidated case is referred to in this Current Report on Form 8-K as the "Securities Case." The complaints in the Securities Case alleged that the Company made certain false or misleading statements in its filings with the SEC, including statements related to the Company's internal and financial controls, the calculation of non-cash share-based compensation expense, the late filing of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (which was filed by the Company with the SEC in June 2013), the dismissal of the Company's previous independent registered accounting firm, and other matters identified in the Company's Form 8-K filed with the SEC on April 16, 2013, as amended. The complaints demanded that the defendants pay unspecified damages to the class action plaintiffs, including damages allegedly caused by the decline in the market price of the Company's common stock between February 22, 2013 and April 22, 2013.
As reported by the Company in a Current Report on Form 8-K filed with the SEC on June 25, 2014, on June 23, 2014, the United States District Court for the Southern District of New York issued an Opinion and Order granting the Company's and the individual defendants' motion to dismiss the Securities Case. The plaintiffs subsequently appealed the decision dismissing the Securities Case to the U.S. Court of Appeals for the Second Circuit.
On June 23, 2015, the U.S. Court of Appeals for the Second Circuit entered a Summary Order unanimously affirming the Southern District of New York's dismissal of the Securities Case in favor of the Company and the individual defendants. A copy of the Summary Order is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Motion for Summary Judgment Pending in Remaining Derivative Securities Case
As previously reported by the Company in its filings with the SEC, including the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015, a series of stockholder derivative cases was filed against certain of the Company's officers and directors alleging that the individual defendants breached their fiduciary duties to the Company with respect to the accounting and internal control matters identified in the Securities Case (the "Derivative Cases"). As previously reported, all of the Derivative Cases have been dismissed except for one suit filed on March 19, 2014 by Richard Harveth (the "Harveth Case") in the 125th District Court of Harris County, Texas (the "Harris County Court"). The Company and the individual defendants have moved for summary judgment with respect to the Harveth Case. That motion is currently pending before the Harris County Court. The Company cannot predict the outcome of the Harveth Case, although, if the motion for summary judgment is not granted by the Harris County Court, the Company and the individual defendants intend to continue to vigorously defend against the Harveth Case. It remains possible that additional stockholder derivative suits could be filed over these prior events.
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Oil and gas producer Magnum Hunter Resources Corp. will use proceeds from the sale of its stake in a gathering system to pay down $300 million to $400 million in debt and to resume drilling. Additionally, the Texas-based company (NYSE:MHR) is working on forming not one, but two, joint ventures to help it develop its Ohio and West Virginia acreage, chairman and CEO Gary C. Evans said Thursday.
Evans was in Pittsburgh for the Hart Energy DUG East conference, where, in a morning presentation, revealed that the company is intending to sell its 45.53 percent share in the Eureka Hunter pipeline and its TransTex Hunter gas processing services business. The deal is expected to raise $600 million to $700 million in cash for the company, allowing it to restructure its balance sheet and greatly improve its liquidity.
In an ensuing question-and-answer session following the presentation, Evans declined to identify the buyer, but said it's a master limited partnership. He said the sale will be completed as soon as possible.
Magnum Hunter, a proponent of the Ohio Utica, has been battered by low energy prices. To improve its liquidity, it has been undertaking a set of initiatives that included assets sales, forming a joint venture and selling a portion of its stake in Eure
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