Australia's struggling oil and gas producers are expected to put more assets on the market this year as oil prices hit fresh 12-year lows.
But analysts say local companies will struggle to find buyers as oil prices continue to fall, putting further pressure on already weak balance sheets.
US crude prices fell 4.3 per cent to $US31.72 a barrel, while benchmark Brent dropped five per cent to $US31.83 a barrel amid fears over slowing demand in China and a growing inventory glut.
IG market analyst Angus Nicholson said renewed fears about China had driven the overnight sell-off and there could be further significant share price falls among Australia's oil and gas players which were struggling to break even.
"Future asset sales are more likely," Mr Nicholson said.
"The last thing any prospective M&A buyer wants to see is a further drop in prices.
"A lot of people will be sitting on the sidelines because at the moment it's very much in freefall. Heading down to lows of $US20 level is still very possible."
Companies such as Santos, Origin, AWE and Drillsearch could come under heightened pressure if prices remained around $US30 a barrel for six months, he said.
Mr Nicholson said merger and acquisition activity had all but disappeared with the recent fall in oil prices.
Fat Prophets analyst David Lennox said company cost cutting would continue into 2016 ahead of a painful financial reporting season next month.
"If the oil price stays this low there will be significant writedowns of values in the balance sheets," Mr Lennox said.
Virtually all of Australia's oil and gas companies were struggling at current prices," Mr Lennox said.
"Until we see significant production cuts it's going to be a continuation of the same."
Recent forecasts of slowing global growth had come as a "double whammy" following the 2015 supply surplus, he said.
Santos shares were 26 cents lower at $3.01, Woodside Petroleum dropped 55 cents to $27.19, Origin Energy lost 20 cents to $4.15, Drillsearch was steady at 35.5 cents and AWE was three cents weaker at 42 cents.
BHP Billiton, which has significant oil and gas interests, was 54 cents lower at $15.27.
Meanwhile shares in Beach Energy were 4.5 cents lower at 38.5 cents after it appointed Oil Search executive Matthew Kay as its new chief executive officer.
It comes after Origin Energy confirmed its $24.7 billion APLNG project shipped its first LNG cargo to Asia on Saturday.
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