INTERVIEW-Oil companies looking at US ethanol assets

NEW YORK, March 4 (Reuters) - Flush with cash amid record crude prices, oil companies are looking at buying U.S. ethanol distilleries, a Credit Suisse banker said in an interview on Tuesday.

Earnings for most oil companies have soared on record crude prices while profit margins for distilling ethanol, an alternative fuel that is blended into gasoline, have slumped this year on record corn prices above $5.00 a bushel.

Oil companies "have stronger balance sheets than any of the ethanol companies themselves," said Paul Ho, director of the global energy group at Credit Suisse First Boston in New York. "I'm thinking about strategic moves."

Last year's energy law that requires a five-fold increase in blending of biofuels like ethanol into gasoline by 2022 may also be making ethanol distilleries more attractive to Big Oil.

For an oil company to meet blending mandates, "it may be easier for them to just have some of the ethanol assets themselves," Ho told Reuters. "There could be commercial reasons aside from just profitability as to why these guys want to own a piece of the assets."

Ho would not say what oil companies were interested, but said he expected deals to occur within a year to 18 months. He adding that some agricultural and industrial companies may also be looking to buy ethanol distilleries.

Large ethanol players themselves were less likely to buy smaller ethanol assets, he said, because few have access to capital markets right now after borrowing money to build capacity amid the promise of generous government incentives. "All of these guys have a very low credit profile," he said.

U.S. ethanol capacity has doubled in a little over a year to more than 8 billion gallons per year.

Potential buyers, Ho said, expect that today's high corn prices will ease, while prices for crude, new supplies of which have become harder to find, may stay around $100 a barrel.