Four Houston oil companies among Goldman Sachs’ picks for likely acquisition targets

Houston-area shale companies EOG Resources, Noble Energy, Anadarko Petroleum and Cabot Oil & Gas are the best targets for potential acquisitions by integrated giants like Exxon Mobil, a new Goldman Sachs report contends.

The “Global Energy: M&A” report makes the argument that Big Oil giants like Exxon Mobil and Chevron still have relatively small stakes in attractive U.S. shale plays and could look to buy shale exploration and productions companies with strong assets and balance sheets. Deals could pick up later this year and into next year after companies deal with debt and loan re-negotiations this fall.

Apart from the four Houston-area companies named, Goldman Sachs said Irving-based Pioneer Natural Resources, Forth Worth-based Range Resources and Oklahoma’s Continential Resources represent the other top potential targets. The report named Exxon Mobil as the most likely buyer, but also mentioned that France-based Total may look to acquire. Some shale companies could target each other as well, the report added.

“Majors own only 5 percent of the total U.S. shale oil resources … despite it being the biggest area of supply growth and productivity improvements on a global basis,” the report stated.

The integrated oil majors have about $150 billion in “firepower” to buy companies, Goldman Sachs noted, and they can also defer a total of $325 billion in planned capital spending on marginal projects that can be redirected toward acquisitions.

“Majors are meaningfully under-exposed to US shale oil,” the report added. “We expect a pick-up in M&A activity in this win-zone.”

Goldman Sachs said unconventional liquids in North American shale are expected to be the biggest area of supply growth globally over the next three years.

“To date M&A activity has been focused outside of shale, but we see appetite for shale acreage from the majors,” the report said. “We note Exxon and Total stated they are willing to consider a shale acquisition, however a common pushback from the companies has been around elevated entry prices.”