The 2003 slowdown in whole-company A&D activity is well over, as several large U.S. independents have already vanished this year. Purchases of large publicly held E&P companies in 2003 numbered four. Through the first half of 2004, eight large publicly held U.S.-based producers have been bought out or are being purchased. And more are expected to disappear by year-end as: • Larger producers attempt to continue to improve their exposure to U.S. natural gas, or simply need to buy growth that they have been unable to generate via good prospects, or they have no other home for their surplus cash; • Executives of other publicly held companies opt to get out of the public-company business. Several of them are starting private firms. John Herrlin, E&P analyst for 1Merrill Lynch \Ô , says, "Each time one of these M&A events occurs, we get the calls guessing 'the next Dead Man Walking.' We don't find that strategy very fruitful because there are fewer and fewer assets that fit in today's world." He can't imagine why producers that have shed labor-intensive land plays would now overpay for them. But high oil and gas prices can make E&P companies do strange things, he adds. "What is strange is that, with Kerr-McGee as an example, it sold $383 million in onshore assets-some 55 million barrels of oil equivalent (BOE)-in 1996 and, eight years later, is now paying $11.50 per BOE for onshore assets after having opted to de-emphasize the onshore." Just as strange is how high oil and gas prices can make public markets do strange things, too. Shareholders are consuming the news of each large E&P purchase like oxygen. For example, shares of 1Kerr-McGee ÇS have risen since it announced it would buy 1Westport Resources 5 . Its bet is a safe one if higher commodity prices really are here to stay. Another interesting market note: shares of 1Anadarko Petroleum Corp. ¯- were trading at around $60 each at press time. A year ago, the company was unofficially being shopped. The story was that chairman Bob Allison wanted $60 per share but prospective buyers wouldn't pay that much. Today, the stock's there and that's despite Anadarko announcing it will sell 15% of its proved reserves and 25% of its production. Maybe $60 per share a year ago was cheap. Herrlin adds a note about the unpopularity of running a publicly held E&P company these days. "...It's been surprising how few companies have been taken public in recent years, and one should assume that means there is a dearth of assets from which new players can grow or an aversion to all of the risks of being public." Meanwhile, higher commodity prices will continue to mask some of the drawbacks of running a public firm. And, forecasters don't expect any near-term end to prices' buoyancy. Brad Beago, E&P analyst for 1Calyon Securities (USA) Inc.  , adjusted his outlook upward at press time. He now expects 2004 commodity prices to average $5.85 per thousand cubic feet of gas (Mcf) and $36 per barrel of oil. "If actual commodity prices in 2004 meet our estimates, these would represent the highest prices ever received by the independent producer group since deregulation," he adds. M&A advisor 1Waterous & Co. S noted in its review of first-quarter 2004 activity that "strong cash flows combined with the endless pursuit for growth are resulting in more companies 'stepping out' of their traditional core areas, not only aggressively bidding on assets in new regions, but on new types of reserves, e.g. coalbed methane (CBM)." Everything looks better with a $5.85 strip.