Consolidation rages in the oil patch: In the wake of Amerada Hess' just-announced acquisition of Triton Energy, who's next? Speculation has thickened that one target could be Ocean Energy (OEI ), the seventh-largest U.S. oil-and-gas exploration company in terms of production. Ocean is no stranger to dealmaking: It merged into Seagull Energy on Mar. 30, 1999--retaining the name Ocean Energy. Whispers are that Royal Dutch Petroleum, Kerr-McGee, and Anadarko Petroleum have looked into Ocean. With Amerada paying a 51% premium for Triton, some pros figure Ocean, now at 17 a share, is worth 25 to 30 a share in a buyout.

Ocean is an "attractive target because of its exploration inventory--superior to its peers--and it's one of the fastest-growing producers among its large-cap rivals," says Shannon Nome of J.P. Morgan Chase, who rates the stock a buy. Ocean has been increasing its already large inventory of "high-potential worldwide deepwater projects," she says. Nome expects Ocean to drill 27 to 30 deepwater wells this year. It holds interests in 4 million acres in West Africa, plus recently acquired acreage in Brazil. Its explorations--in such areas as Guinea, Angola, and Gulf of Mexico--could result in big discoveries, says Nome.

Royal Dutch owns 60% of Royal Dutch/Shell Group, the world's second-largest publicly traded oil company. Kerr-McGee recently formed a pact with Ocean for exploration in the Gulf of Mexico. Anadarko is also an active worldwide oil-and-gas explorer and producer.

Ellen Hannan of Bear Stearns says Ocean's high-quality properties have "distinguished it from its peers." She sees Ocean earning $1.81 a share in 2001, up from 2000's $1.30, with cash flow of $4.84, vs. 2000's $3.71. Ocean, as well as Royal Dutch, Kerr-McGee, and Anadarko, declined comment.

By Gene G. Marcial

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