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Return of M&A? Driller…Driller Night!

|Includes: BHGE, BJS, Cameron International Corporation (CAM), CLB, DWSN

Few people have been harping on merger mania as much as  Dasan. When he makes an incessant statement, as he has with the return of “merger Monday”, it is cause for attention. Much has been made over the number of insiders selling, when in fact company executives have historically sold at horrible times. I remember in the mid 90s seeing the insider sales list littered with names that would be the rocket ships of the tech boom. Mergers and Acquisitions, however, are much more telling.

The merger that stands out the most in my mind is the BHI-BJS deal. When we had the last round of mergers at the end of the recent boom, we did not see consolidation within the drilling sector. Read carefully the following statement with regards to the transaction:

Chad Deaton, Baker Hughes chairman, president and chief executive officer, stated, “BJ Services broadens our portfolio by adding products, technologies and talented people that are key to helping our customers unlock value in their reservoirs, particularly in unconventional gas and deepwater fields.”

“….PARTICULARLY in unconventional gas and deepwater fields!”

Therein lies the rub!

That will be the nature of the drilling game as we try to maximize seemingly dry reservoirs, and reach the unreachable oil & gas at 20,000 leagues under the sea! It is with this statement that I want to pursue Oil Service names when the market offers us a pullback. In particular, I want names that produce products, technology or equipment that is unique to that company and crucial to extracting in exotic or difficult areas. Names like my fave CAM, or CLB & DWSN. Not only do I want to find names that are flashing solid technicals, but I want the added kicker of a potential buyout.

Yes, I know rig counts are way down YOY, but there has been a slight uptick. I also think less rigs means companies will continue to seek further competitive advantages. And those with the means to offer that advantage have a buyout bullseye on their back.

To summarize in the words of the late great Michael Jackson we might be singing,”Driller, Driller night…!”

Note: Away from the drillers I am doing research on EC the state owned oil company of Colombia.

Tomorrow’s blog: Solving the Condo Glut in Miami …this will be a classic not to be missed!


**Disclosure: no positions