Expect to continue to see relatively few property transactions this quarter, says Madison Energy Advisors, a Houston-based oil and gas M&A firm. Buyers continue to offer smaller sums than sellers will take-when there is a seller. The latter are increasingly rare. "With the current very-attractive oil and gas prices, it is not surprising companies have retained properties for their operating cash flows," reports Bill Marko, Madison vice president, special projects. The early-October Nymex 12-month strips were $29.84 per barrel of West Texas Intermediate and $4.81 per million cubic feet of Henry Hub gas. The firm had predicted, this past quarter, that the A&D environment would remain choppy through year-end, as middle-market companies and energy bankers continue to diverge in their outlooks on oil and gas prices. "This trend continues and the differential between the two groups has grown," the firm reported October 1, when releasing its fourth-quarter pricing poll. Madison has conducted the survey for 13 years. In the most recent review, energy bankers said they expect oil prices to average $23.71 per barrel in this quarter. Meanwhile, middle-market companies expect oil to average $32.81. Their opinions of fourth-quarter gas prices are equally diverse. The bankers expect $2.85 gas; the middle market companies, $5.07. "Despite these numbers all hope is not lost for an active A&D market," Marko adds. The firm expects a push of properties coming into the market towards year-end. "Sellers are desiring to close December 31 or January 1 so they may keep all of 2000 operating cash flow and exit those properties that are not core to them. The challenge for everyone will be to find ways for these properties to close by balancing seller, buyer and lender expectations." As for 2001 oil and gas prices, energy bankers are expecting $22.46 oil and $2.82 gas; middle-market companies, $29.10 and $4.35. -Nissa Darbonne
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