Jack Luellen was quoted in the Institutional Investor article, "Falling Oil Prices Spur Energy Dealmaking." Full text can be found in the January 29, 2015, issue, but a synopsis is below.
Almost no one predicted that oil prices would drop so low and that companies themselves, would lose billions of dollars in value.
Energy Producers are now scrambling to make debt payments to cover their costs. Should this trend continue results could include amended credit agreements, defaults and a rash of asset and company sales.
The flow of conventional M&A as well as asset sales involving private equity is expected to increase in the coming months.
"There's going to be potential for a lot of M&A activity, but it's going to depend on a couple of things: when prices start to come back and whether banks and private equity companies are going to force some sales," said Jack Luellen.
While many companies are holding out in hope that oil and gas prices will rise soon, some cannot afford to wait and will find themselves becoming targets for investment firms and companies.
What these distressed sales will look like will depend on the parties involved. Luellen expects that if the current trend continues through 2015, there will be big opportunities for those who can stomach the risk. Those opportunities may not emerge for several quarters yet, but if prices stay where they are, highly leveraged firms will eventually have no choice but to sell.
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