Energy execs see brisk U.S. deal flow in 2012: survey

Mon Jan 9, 2012 7:45am EST

A security personnel stands guard at the Yanshan oil refinery of Sinopec Corp. in Beijing May 31, 2011. REUTERS/Petar Kujundzic

A security personnel stands guard at the Yanshan oil refinery of Sinopec Corp. in Beijing May 31, 2011.

Credit: Reuters/Petar Kujundzic

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(Reuters) - Energy executives expect dealmaking in the U.S. oil and gas sector to rise in 2012 or at least match last year's brisk pace, according to a survey by consulting and advisory group BDO USA, LLC.

The boom in development of shale rock formations has spurred tens of billions of dollars in deals as energy producers seek to invest in the fields believed to hold massive quantities of oil, natural gas and natural gas liquids.

Nearly one-third of the 100 chief financial officers from the small and mid-sized U.S. companies in the survey provided to Reuters pointed to high energy prices as the driving factor behind the industry's growth, with another quarter of the respondents citing the discovery of new fields as the key.

Just last week, Japan's Marubeni, China's Sinopec and France's Total SA each bought stakes in U.S. fields.

A 52-percent majority of the CFOs predicted the M&A activity would rise in 2012, while 46 percent said they saw dealmaking at the same level as last year.

"You look at an oil and gas investment and there are a lot of places you can put your money," said Rocky Horvath, a partner in Houston with BDO's natural resources industry group.

"An oil and gas investment gives you the ability to participate in an industry that is actually doing pretty well."

The discovery of the shale and other unconventional fields has set off a land grab among energy companies to secure drilling rights in areas that were once too difficult or expensive to tap into.

But the advent of hydraulic fracturing, or fracking, technology has made producing from those fields increasingly lucrative for exploration and production companies such Exxon Mobil, Devon Energy and Cabot Oil and Gas.

Companies are focusing their drilling activity on oil or other liquids-rich areas rather than on 'dry' gas regions because prices for natural gas have recently fallen below $3 per million British thermal units to their lowest levels in more than two years.

Crude oil prices, however, have remained strong, topping $100 per barrel this week.

A slight majority of the companies surveyed said they had delayed or canceled projects because they lacked the cash to proceed, about the same number that said federal or state rules had slowed their work.

The brisk drilling activity also made securing the needed equipment more difficult, with 40 percent of the companies citing equipment shortages or delays for pushing projects back.

(Reporting By Matt Daily, editing by Dave Zimmerman)

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