Low cost capital, compelling valuations and building evidence on the ground that a bottom is in, or at least very close: Those are the necessary conditions for a resurgence of mergers and acquisitions activity in the energy sector.

At this point, cost of equity capital is high even for best in class companies. Debt capital, however, is a far different story. Model Portfolio member’s ExxonMobil (NYSE: XOM) bonds of April 2051 yield just 2.9 percent to maturity, while Williams Companies’ (NYSE: WMB) May 2050 bonds yield less than 3.7 percent. And private capital has rarely if ever been this flush.

There’s no doubt it’s been a disappointing summer for energy stocks.

Energy stocks were the best-performing group in the S&P 500 from the March 23^rd lows through the June 8^th peak, soaring 96.5%. However, from June 8^th through the present date, energy reversed course, falling about 22.9% compared to a return of just under 9% in the S&P 500.

And that’s despite the fact that oil prices have continued a steady drift higher all summer from around $38 in early June to approximately $43 today while natural gas prices have climbed steadily from a June 25^th low under $1.50/MMBtu to above $2.60/MMBtu.