Transatlantic oil deals
Mergers and acquisitions in the petroleum industry have reached almost $100 billion in 2007, according to Bloomberg, an increase of 25% over last year's pace. Oil companies are cash-rich and business is getting harder to do in countries form Venezuela to Iraq, as the scramble is on to sew up existing oil fields.
Eni
Yet another set of Gulf of Mexico oil and gas holdings was snapped up by a bigger company, this time by Italian petroleum giant Eni. In a $4.8 billion deal, that company bought the gulf production, development and exploration operations from Dominion Resources. Eni already has smaller fields in the region, but the purchase will triple its Gulf holdings.
Eni' recently work with fellow Italian energy company Enel to acquire Yukos's Russian assets for a maximum of nearly $6bn. It's also active in Angola, Congo, and Alaska. In addition, it is building up liquid natural gas (LNG) is Nigeria, Egypt, and Kazakhstan. Unlike holdings in politically unstable parts of the world, the gulf holdings look much safer, even given hurricane risks. In addition, the decline in the dollar versus the euro makes these holdings all the more affordable for a European company.
Dominion Resources is the #2 US utility companies. It will concentrate on its natural gas pipeline and electric utility businesses, making a strategic discard of its non-core oil and gas exploration assets.
Statoil
Meanwhile, Norway's #1 oil company Statioil announced it would acquire Canada-based North American Oil Sands Corporation for around $2 billion. The company has eases on tar sands in Alberta.
Statoil has already bought considerable assets in the Gulf of Mexico, as output from North Sea oil fields declines and to make up for Venezuelan takeovers. In 2006, it acquired the oil unit of fellow Norwegian firm Norsk Hydro ASA in a $28 billion deal.
There have been other recent Alberta oil sands deals, according to a Bloomberg article ("Statoil to Pay $2 Billion for Canadian Oil Company", 4/27/07).
Royal Dutch Shell Plc paid C$2.43 billion ($2.2 billion) for Calgary-based BlackRock Ventures Inc. last year to gain greater access to Alberta oil sands. Paris-based Total SA acquired Canada's Deer Creek Energy Ltd. for C$1.67 billion in 2005.
The betting is that the difficult-to-extract heavy oil in the sands will continue to rise in value as world oil prices rise. In addition, the Canadian assets, like the Gulf of Mexico ones, are safe ones in a dangerous world.
