BofA: M&A Could Give Upside To Energy E&Ps

In a report published Thursday, BofA Merrill Lynch analysts mention that there could be more M&A activity in the Oils E&P sector, with the industry adjusting to a new macro context. In the report BofA Merrill Lynch noted, "We previously published our view that the recent oil price correction would lead to increased M&A activity. Indeed, we already saw ENOC confirming interest in Dragon Oil in March, while last year, Repsol made a bid for Talisman (still pending) and Seplat Petroleum engaged Afren in takeover talks but ultimately decided not to make an offer." The industry is likely to witness more opportunistic corporate activity. The main beneficiaries of this would be in the E&P space, with "upside to NAV and attractive valuations on EV/2P of reserves basis." The analysts said further, "In our E&P coverage we believe that asset/transaction buyers will continue to favour strong production bases or near-term production ramp-up stories as a hedge against oil price uncertainty…In Integrated Oils, we have long set our preferences for stocks that are cheap on our NPV screens, have less pressure on cash flows from dividend obligations and have shareholder bases that are unlikely to stand in the way of potential industry approaches." The analysts have a Buy rating on

and

. The price objective for BP has been maintained at 480p, while for ENI at €19.