"In the coming months, we'll see large companies acquiring smaller profitable players and when this happens there will be big profits to be made," said DiGeorgia. "This activity is fueled by the intense pressure for oil companies to remain profitable not just for the long term, but for the short term.
DiGeorgia, author of The New Bull Market in Gold and The Global War for Oil, also points out that this frenzy won't be initiated by private equity firms on Wall Street. Rather, he says, it will be somewhat incestuous In that it will be originated by large players such as Exxon, Mobil and others.
This activity is also different from traditional M&A strategies when troubled companies are purchased, cleaned up, made profitable and then go public. Today's shareholders in the energy sector don't have the patience for this process or ones involving exploration or the development of new technology.
"As a result, small, healthy companies are being targeted because they can immediately contribute to the bottom line," said DiGeorgia. "Large companies have plenty of cash, but no time to replenish reserves. The only way to keep dollars pumping is by acquiring smaller companies with these reserves and other benefits. So, the pressure is on the CEOs of major energy companies, and it is this pressure that will fuel the upcoming M&A frenzy."
