As was expected, the Organization of Petroleum Exporting
Countries (OPEC) announced on June 5 that it will
maintain its crude oil production at 30 million barrels per day.
This is the second time in six months that OPEC has decided to
maintain it crude oil production. This decision was made in light
of declining oil prices that many people are attributing to an
oversupply of oil. The drop in oil prices puts pressure on
producers that use higher cost production methods, including many
US and Canadian based producers. Commenters have suggested that the
decision by OPEC to maintain its production means that we will
likely continue to see low oil prices and financial pressure on US
and Canadian based producers.
A recent article from the March edition of the Lexpert Magazine
titled "Oil Crash Dealmaking: The best time to pursue
energy M&A may be now” highlighted how M&A
activity can be used by producers to help manage uncertainty in a
time of unstable oil prices. According to the article, in a number
of the recent oil price slumps, large players in the industry have
merged in an effort to consolidate their businesses. This provided
cost savings, generated revenue synergies, eliminated key
competitors and improved negotiating power. The article suggests
that while the oil markets will eventually balance themselves out,
in the meantime we should expect to see considerable M&A
opportunities that may be capitalized upon.
This sentiment is echoed by many other commenters who have
suggested that depressed oil prices afford greater opportunities
for investment, including encouraging businesses that invest in
distressed companies to become active in the oil sector.
OPEC's announcement to maintain its oil production likely
means continued depressed oil prices and possible instability
within the sector, leading to an increase in M&A opportunities
for companies that are well capitalized and willing to assume the
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