Privatisations, takeovers await bombed-out oil and gas stocks

They're now so cheap they might as well get delisted.

More oil and gas service providers are likely to get delisted or embark on mergers and acquisitions (M&A) this year, according to a report by Maybank Kim Eng.

After the steep crash in oil prices, many smaller players are now so devalued that their owners might just decide to get privatised.

"Clearly, oilfield services share similarities with the shipping sector and a consolidation wave is expected. Many small players are over-leveraged due to prior debt-funded expansion. They face the threat of bankruptcy if the downturn is extended," said the report.

Offshore shipyards are also reeling from order droughts, while asset owners are suffering from low asset utilisaiton and a 15-30% drop in charter rates.

Globally, consolidation has already been set in motion by two potential mega-mergers, namely the USD35b Halliburton-Baker Hughes deal and USD15b Schlumberger-Cameron merger.

In Singapore, there could be more targets than acquirers as most players are small and highly leveraged.The industry needs to cut costs and reduce capacity for long-term profitability,” said the report.
 

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