Despite negative press, Latin America is experiencing an increasing level of M&A transaction activity. New entrants in the form of national oil companies (NOCs), niche players and small-cap E&Ps are underpinning the increase in the number and value of transactions. The hottest market is emerging in Colombia, while Argentina continues to attract attention despite continued government intervention. Transaction activity in Venezuela, Ecuador and even in Bolivia may make a comeback once their contractual and fiscal systems stabilize. The region is a modest contributor to global oil and gas supply (13% of production), with two globally relevant resource countries (Mexico and Venezuela holding more than 80% of reserves). Venezuela, Mexico, Ecuador and Bolivia are net exporters. Argentina and Colombia are marginal exporters who risk becoming importers, while Brazil has recently achieved a heavy oil surplus capacity. Increasing uncertainty in political-risk perceptions has resulted in a partial refreshing of private-sector players, with the higher-risk-takers replacing the more risk-averse. Super-majors seem to be harvesting or abandoning most non-glamorous plays and leaving interstitial niches for others; they now hold just 13% of reserves. The hosts' "client" base is gradually shifting to aggressive NOCs, such as China's CNPC and Sinopec and India's Oil & Natural Gas Corp. (ONGC); pragmatic international oil companies (IOCs), such as Occidental Petroleum, Perenco SA and Apache Corp.; entrepreneurial small-cap E&Ps (many Canadian and British); and indigenous private micro-independents. This small-company mushrooming phenomenon is noteworthy, with Argentina and Colombia appearing to be their favorite areas. For more on this, see the January issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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