Driver of Consolidation in Oil & Gas Services May Unlock as Companies Pursue Strategic Corporate Initiatives: Analyst Gregory Lewis of Credit Suisse Group Discusses M&A in the Sector with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - July 10, 2014 - The Wall Street Transcript has just published its Oil & Gas Review 2014 Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Oil & Gas Review 2014

Companies include: Total SA (TOT), BP plc (BP), Rowan Companies Inc. (RDC), Gulfmark Offshore Inc. (GLF), Noble Corp. (NE), Transocean Ltd. (RIG) and many more.

In the following excerpt from the Oil & Gas Review 2014 Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Are we likely to see acquisitions or consolidation in the industry?

Mr. Lewis: I think there is the opportunity for consolidation in the offshore drilling space and in the offshore supply boat sector, but I think it's more of a longer-term event. I don't think it is a 2014 event.

But I think it makes sense given the synergies and economies of scale in both industries. The driver of consolidation could be unlocked as some companies pursue strategic corporate initiatives that could increase their valuation.

I cover an offshore driller, Noble (NE), which is in the process of spinning off its lower-quality assets. I would argue that Noble post the spinoff could be in a very interesting position to be a company that could consolidate some of the offshore drillers, but first Noble has to spin off those assets.

Spinning off the lower-end assets is something other companies are doing as well. There is a company called Shelf Drilling, which bought lower-end assets from Transocean (RIG) in late 2012. So yes, there is an appetite by some players for lower-tier or standard equipment. In a good market all equipment works; it's in a more challenged market where the lower-generation equipment goes idle.

TWST: What about valuation in the space, are they pretty good right now?

Mr. Lewis: From a historical valuation perspective the stocks look interesting, as valuations are below their historical levels. However, part of the valuation discount to historical levels is being driven by an expectation of declining day rates; that is never good for these stocks. There are a lot of questions about where day rates for deepwater rigs are headed, and we are in the cautious...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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