Low oil prices could spur further mergers and acquisitions (M&A) across the oil and gas sector in 2016, analysts told CNBC.
Speaking to CNBC on Tuesday, Karri Vuori, head of M&A at Panmure Gordon said that alongside healthcare and advertising technology, oil and gas is one of the top sectors to watch in terms of M&A deals this year.
“The juniors can’t support their asset bases anymore, their balance sheets aren’t looking very strong,” Vuori said.
It comes as oil prices continue to fall amid a supply glut that has shaken energy firms across the globe. Brent crude prices are down over 33 percent over the past 12 months and were sitting around $37.17 per barrel by mid-day London trade. U.S. benchmark WTI prices are close behind, down over 30 percent over the past 12 months, near $36.75 per barrel.
Most companies were able to hold out through the price troughs of 2015, Jefferies equity analyst Jason Gammel said, but 2016 could set the backdrop for further acquisitions by year-end.
“Smaller companies have been able to maintain balance sheet flexibility, but this could erode,” Gammel told CNBC in a phone interview.