U.S. oil deal-making reshaping energy landscape amidst ExxonMobil, Chevron megadeals
(Bloomberg) – Chevron Corp.’s proposed $53 billion takeover of Hess Corp. is the second megadeal this month and makes resoundingly clear a new wave of consolidation is reshaping the energy landscape.
U.S. oil and natural gas companies are circling each other for potential match ups to keep investor returns growing as the nation’s prolific shale fields age. Exxon Mobil Corp. announced earlier this month it agreed to buy shale-oil producer Pioneer Natural Resources Co. for $59.5 billion, locking up new drilling sites for years to come and underpinning a bet that oil and gas will remain central to the world’s energy mix for decades ahead.
“It’s an eat or be eaten world,” said Cole Smead, who helps manage $5.3 billion including U.S. energy stocks at Smead Capital Management. “People who can drive higher returns will be the ultimate owners.”
North American energy companies completed about $76 billion of deals through the first three quarters of the year, roughly flat with a year earlier. But when you combine Exxon and Chevron’s two latest deals along with all of the other potential deals in various stages of advancement, this would be the industry’s biggest year of consolidation since the pre-pandemic era, according to data compiled by Bloomberg.
Now that Exxon and Chevron have announced their megadeals, the biggest buyers are apt to take a bit of a breather from the shale M&A game. But there are still plenty of smaller players — including some worth well over $10 billion — courting one another. Here is a list of other U.S. oil companies potentially playing some role as the sector further consolidates:
ConocoPhillips. ConocoPhillips is now the biggest player to watch when it comes to oil and gas consolidation, according to Dan Pickering, founder and chief investment officer of Pickering Energy Partners who helped finance the U.S. shale revolution.
“Conoco moves into the lead role as a buyer of the next big asset,” Pickering said in an interview.
ConocoPhillips began aggressively expanding in the Permian basin during the Covid-19 pandemic with its $13 billion takeover of Concho Resources, one of the region’s biggest independent explorers. CEO Ryan Lance followed that within months with the $9.5 billion purchase of Shell Plc’s Permian assets. ConocoPhillips’ stock has climbed 60% in the two years since then and its market value is now higher than supermajor BP Plc.
Devon Energy. The Oklahoma City company is seen as both a takeover target and a possible acquirer. The company is potentially attractive to larger players because of its diversified footprint across five of the biggest U.S. shale fields, with most of that output in the Permian.
Devon Energy Corp. bulked up last year with a pair of its own deals that totaled about $2.7 billion and has held preliminary talks in recent months about a deal with Marathon Oil Corp., Bloomberg News previously reported, citing people familiar with the matter.
Separately, Devon has been looking at CrownRock LP, a closely held company active in the Permian basin, the biggest and most productive oil field in the U.S., the people said.
Diamondback Energy. Diamondback Energy Inc. purchased Permian explorer Firebird Energy LLC for about $1.6 billion in late 2022. Weeks later, it made a similarly sized deal to buy drilling rights from closely held Lario Oil and Gas Co. On a combined basis, the Firebird and Lario transactions expanded Diamondback’s Permian footprint by an area almost twice the size of Brooklyn.
EOG Resources. One of the largest independent U.S. shale operators, EOG Resources Inc. has shown little interest in big dealmaking. When CEO Ezra Yacob and other EOG executives are quizzed by analysts about the prospect for M&A, they typically say they’re focused on expanding organically and through small, bolt-on acquisitions.
“We built this company on the success of organic exploration, and we see that as the best opportunity for full-cycle returns,” Yacob said at the Barclays CEO Energy-Power Conference on Sept. 5. “We’re not collecting cash on the balance sheet to do some sort of M&A.”
Chesapeake Energy. Merger talk is also active in Appalachia, a giant shale gas formation in the Northeastern US. Chesapeake Energy Corp. is considering a deal to buy rival natural gas producer Southwestern Energy Co., Bloomberg News reported last week.
Chesapeake and Southwestern are two of the biggest players in Appalachia. They also operate in the Haynesville, another gas basin in Louisiana, along the Texas border.