The Market Vectors Oil Service ETF (NYSEArca: OIH) got a lift this week after Schlumberger (NYSE: SLB) said it will acquire rival Cameron International (NYSE: CAM) for $12.7 billion.
Predictably, that deal has sparked speculation that there is more to come in the oil services space in terms of consolidation. Cameron rivals such as FMC Technologies, Inc. (NYSE: FTI), Aker Solutions, Forum Energy Technologies, Inc. (NYSE: FET) and Dril-Quip, Inc. (NYSE: DRQ).
Looking at international energy sector mergers and acquisitions, a small, obscure ETF could soon find itself in focus as Chinese energy giants look to join forces or go hunting for overseas assets. That ETF is the Global X China Energy ETF (NYSEArca: CHIE).
“Oil’s collapse to a six-year low has prompted a wave of acquisitions across the energy industry. Three of the last five quarters have exceeded $160 billion in deal volume, surpassing even the late 1990s, a period when many of the world’s largest energy corporations were formed, according to data compiled by Bloomberg. While China’s big three oil companies have sat out this latest round, China Petroleum & Chemical Corp. also said Thursday it’s seeking overseas assets, signaling that at least two of them are now ready to join the spree,” reports Aibing Guo for Bloomberg.
CHIE, which has just $1.5 million in assets under management, allocates a combined 28.5% of its weight to its top three holdings, Sinopec, Cnooc (NYSE: CEO) and PetroChina (NYSE: PTR). The ETF, which turns six in December, tracks the Solactive China Energy Total Return Index.
Even with a bounce in oil futures Thursday, some market observers remain skeptical of more near-term upside for crude, which would likely impact CHIE and its holdings.
According to a recent CNBC oil survey, the majority of investors and analysts believe WTI will slide to between $30 and $40 per barrel this fall, with about 62% of respondents anticipating the WTI crude to trade between the range and stay low toward the end of the year,
Additionally, 43% of respondents believe the breakeven price for the U.S. shale industry is about $45 to $55 per barrel, and 24% estimate the breakeven level at $55 to $65. [Breakeven Becomes an Oil Headwind]
“PetroChina Co., the country’s biggest oil and gas producer, signaled it’s looking to join a wave of global energy deals as crude’s collapse makes it the right time to buy and sell assets,” according to Bloomberg.
Global X China Energy ETF
