It sounds like a junior high dance: there is a lot of "staring" going on and not much moving around. Bill Marko, chief operating officer of OGJExchange-Madison Energy Advisors, calls it a "paralysis of decision-making" in the oil and gas acquisitions and divestitures business. "The past, present and future outlook of commodity pricing drives decision-making in the business. Right now, with historically sustained highs that companies expect will fall-post-Iraq, post-winter, etc.-there is a lot of 'staring' going on," he says. Some potential buyers and sellers are finding the courage to jump in. "Some people are selling properties because they see a peak in commodity pricing, they see a shortage of supply of properties and therefore good sale values being realized, or they are smart enough to know to sell noncore assets," he says. Also, like private companies, they may not need to worry about growing volumes, he adds. ConocoPhillips' new chief executive officer, Jim Mulva, announced recently that the company will sell several billion dollars worth of upstream and downstream assets. The company is looking more at its rate of return than on simply growing production volumes, which are expected to fall next year on a merger pro forma basis, he says. ChevronTexaco is planning several asset sales for the fall of 2003, as it comes out of its pooling-of-interests restriction period, according to an update given to A&D professionals at a recent IPAA business-development event in Denver. Marko says other potential sellers are too weak of heart right now to move. "They are not selling because of uncertain prices, fear that buyers will not buy based on $4 gas and $28 oil prices, cannot dilute volumes, are currently seeing good cash flow even from noncore properties, or are not confident in making a long-term decision right now." -Nissa Darbonne
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