The volume of international asset transactions is expected to go up and the competition will be tough as more national oil companies compete with majors and large independents for deals. Closer to home, taking a risk will separate success and failure in the highly liquid North American M&A marketplace. In fact, risk-taking could be the only competitive advantage left. "It's not just about money because today, every company has plenty of money," Todd Stevens, vice president of acquisitions and corporate finance for Occidental Petroleum Corp., said at the recent KPMG global energy conference in Houston. Oxy, the fourth-largest oil company in the U.S, recently strengthened its position in May when it agreed to pay $972 million to acquire ExxonMobil's assets in the Permian Basin. Since 1999, when it acquired Altura Energy, a Permian joint venture of Shell Oil and Amoco, Oxy has made 60 transactions of various sizes in the basin, Stevens said. Some 70% of Oxy's reserves and cash flow are in the Permian and California. (For more on E&P activity in the Permian, see "Hot Times in the Permian" in this issue.) "Our advice is you can't be everything to everyone. You have to focus to have a competitive advantage. If you are interested in something, you've got to take a shot on goal-and like exploration, you will hit maybe one in 20." Identifying and managing risk, however, is key to effective transactions, noted John Boardman, chief executive of RISC, an M&A advisory firm based in Perth, Australia, and specializing in international deals. It has an alliance with KPMG to help clients in integrated business analysis. In the Asia-Pacific region alone, Boardman foresees 16 major property sales in 2005. "Two adages that drive M&A activity are: there is no reward without risk, and reality is merely a perception. So the difference in perception is what drives transactions," Boardman said. One growing risk is that in most major international transactions, a national oil company (NOC) is a very strong bidder. "India's ONGC is now in seven countries, China National Petroleum is in 14, and Malaysia's Petronas is in 22. In almost every opportunity we see, there is a NOC and almost always, the NOC wins." Angola's Sonangol and Indonesia's Pertamina have begun looking at opportunities in other countries as well, he said, and may compete with the majors for assets and exploration acreage. His advice to buyers? Avoid geographic areas or deals where NOCs are apt to be involved, or "have more humility and do an alliance with them because they have local knowledge." Relationships are critical, agreed Oxy's Stevens. "Our chairman [Ray Irani] has relationships in the Middle East that go back decades. That helped differentiate ourselves [when Oxy won bids to re-enter Libya recently]. We opened an office there to show we are committed for the long term." Governments don't like it when an oil company leaves at the first sign of trouble. They have long memories, added Boardman.