Encore Acquisition Co. is going after oil acquisitions while they're out of favor, compared with gas assets, says Jon Brumley, chairman and chief executive officer. "Analysts will push people to gas, so we're going to continue to look at oil," he told participants at the recent KPMG global energy conference in Houston. "If you're trying to buy a gas property, there may be 30 other people looking at that property. For oil, maybe four." Brumley was part of a panel on emerging trends in M&A. Steve McKenna, principal, JP Morgan Partners, said asset-sellers don't have reasonable price expectations right now. "It comes down to internal-rate-of-return issues...Eventually, something's got to give." Brumley expects LNG imports will put a lid on U.S. natural gas prices but that this won't occur sooner than four or five years from now, at the earliest. Meanwhile, the market price for assets is not going to decline. "For quality properties, you're going to have to pay the price," Brumley said. Encore was founded in 1998 and it didn't make any acquisitions its first year. "That tells you acquisitions can be hard to make." Driving M&A right now is that there isn't much opportunity for reserves and production growth in the U.S. through exploration. "When we do an acquisition, we expect that acquisition to produce an 8% to 12% rate of return," or generally the cost of debt capital, and that the ROR will be made without investing much more in the asset, he said. The company uses hedging to guarantee the minimum ROR, and then exploits the acquisition to increase the ROR. "But we don't want to lose [that minimum return]." -Nissa Darbonne