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Consolidations, Mergers Expected to Continue

Consolidations, Mergers Expected to Continue

Consolidation hasn't stopped and, in fact, will play a big role in the future for both large and small players in the oil and gas industry, said David Moore, a strategic practices consultant for Andersen Consulting.

Moore told the Society of Petroleum Engineers in Dallas last week that because as a whole, the energy industry has not done a good job of keeping up with the marketplace in terms of shareholder value, it has been under "relentless" pressure to create new value. Pointing to the "mega mergers" of BP with Amoco and Arco, as well as Exxon's with Mobil, Moore said that while he believes the industry has seen the "last wave" of mega mergers, more will come for smaller companies, and different types of partnerships will emerge in the future.

"We'll continue to see the consolidation of smaller majors and more independents," Moore predicted. "But we'll also see more portfolios restructured and more collaboration." Using what he said would be "co" mergers, Moore said more oil and gas companies will be combining to achieve shareholder value; consolidating their talents; co-locating to work on larger more complex projects; collaboration to streamline projects; cooperation to share talent and resources; and co-acting to build new things.

"We're driving toward what I call network centric, which involves more alliances and interaction. No longer will it be an 'I win, you lose,' scenario, but more of a 'we win' with more cross industry environments."

Because of the Internet, Moore said there will be more synthetic mergers, or mergers that don't necessarily combine monetary assets, but rather, intellectual and resource assets. More specialists are expected to emerge, as more companies outsource their services to rely on others to do things they don't do in house. And with the new types of mergers, Moore said that the leading companies would push to give more business to specialists.

"We'll see more redefinition of the core business," said Moore, and more companies will redefine their portfolios to manage at "e-speed."

Carolyn Davis, Houston

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