Who will buy the bargains?

If the current turmoil in the energy industry triggers a new round of M&A activity in the sector, as analysts and bankers predict, which companies will swoop in?

The larger integrated oil companies are the most obvious suitors. They have all had trouble boosting their production rates. But collectively they are sitting on many billions of dollars worth of cash, so expanding through deals rather than the drill bit may be more attractive, especially with stock prices down, drilling costs high and experienced personnel difficult to come by.

"Prospective buyers that have been focused on liquidity are enjoying the best buying opportunity of their careers," Bill Britain, the president and CEO of auction house EnergyNet Inc., wrote in a column in the January edition of Oil and Gas Investor.

Possible suitors would include BP plc, Exxon Mobil Corp., Royal Dutch Shell plc and Chevron Corp. They all have strong balance sheets and cash flow, solid credit ratings and access to capital markets if they need help funding the purchase or restructuring their target's debt. BP has already taken advantage of the situation by buying up properties from Chesapeake Energy Corp., which has been trying to boost its liquidity.

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Who will buy the bargains?

The larger independents may also want to expand their presence in certain operating areas or jump into new ones at such cheap prices.

Apache Corp., Occidental Petroleum Corp. and Devon Energy Corp. are possible buyers. Apache CEO Steve Farris recently said that the economic reality for deals is much better than it was last summer and the company would start looking for acquisitions.

National oil companies -- those owned in part or controlled by governments -- are also strong possibilities, having big cash coffers and wanting a bigger piece of the U.S. oil business. Candidates include StatoilHydro ASA, Total SA and Petróleo Brasileiro SA, or Petrobas. Wealthy individuals who like to hunt for bargains -- much as T. Boone Pickens and Sid Bass did in the 1980s -- could also come in or expand their holdings, including Philip Anschutz, Kirk Kerkorian, George Kaiser and Carlos Slim.

Possible targets are many, but analysts repeatedly mention the following names: Berry Petroleum Co., Unit Corp. and Petrohawk Energy Corp., which have properties in the hot Haynesville natural gas play in Louisiana; Cabot Oil & Gas Corp., which is in the upcoming Marcellus area; Ultra Petroleum Corp., which is known for its Green River Basin properties in Wyoming; Southwestern Energy Co., which is big in Arkansas; and Bill Barrett Corp., with properties in Utah's Uinta basin, Colorado's Piceance and Paradox basins and Wyoming's Powder River Basin.

"Companies in the energy business are trading well below their historical troughs," said Bruce Bilger, a managing director in the energy practice at Lazard. "Cash being king, those players that are ready to step up will have significant opportunities."