In the most active transactional year ever seen in a single region, the Gulf of Mexico M&A deal flow totaled $13.8 billion in 2006-a number that, in the past, would have been strong for the entire U.S. It is timely to examine emerging trends in the region, including the types of companies that are buyers and sellers, and the widely different opinions and strategic choices that lubricate Gulf deal flow. Nowhere are there more divergent opinions of whether to buy or sell. These range from "I wish we were not there and I want to completely exit" to "I think the offshore offers the opportunity for high returns and I am keenly interested in entering it." Nowhere are new entrants, serial acquirers and major players more diverse. This group includes small and large public and private independents, majors, private-equity-backed producers and foreign operators. From afar, the Gulf E&P business appears uniform, but it has two distinct personalities: shelf operations, which extend to some 1,000 feet of water, and the deepwater business beyond 1,000 feet and at times in more than 10,000 feet. Each presents unique challenges. Shelf operations are older-production there began in 1947-and are wizened. Deepwater activity began in the 1980s and is something of a whiz-kid offspring. Like many sexagenarians, the Gulf shelf has seen it all-from early momentum and a boom in the 1970s to a midlife crisis in the 1980s when oil and gas prices plummeted. And it saw a rebirth in the early 1990s as independents applied 3-D seismic, extended-reach drilling, advanced completion design and creative development schemes across blocks that were being cast off by the majors as they pursued the prize that lay beneath deeper water. It has also experienced serious hurricane trauma many times and recovered nicely. For more on this, see the March issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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