U.S. shale executives anticipate more oil megadeals — some express concerns about consolidation

David Wethe, Bloomberg December 20, 2023

(Bloomberg) — U.S. shale executives are bracing for more megadeals in the U.S. oil industry — and some fear the consequences of consolidation.

Executives predict more monster acquisitions after Chevron Corp.’s $53 billion takeover of Hess Corp. and Exxon Mobil Corp.’s purchase of Pioneer Natural Resources Co. for $59.5 billion in October, according to a quarterly survey by the Federal Reserve Bank of Dallas. For the companies that provide crews and equipment to oil producers, that’s not good news. 

“The consolidation of operators will impede the growth and sustainability of the oilfield service sector,” an unidentified respondent said in the report. “This will lead to the demise of small independent oil and gas operators, as they will be unable to obtain reasonable pricing from the few remaining service providers.”

Oil prices will probably close 2024 at $78 a barrel, survey respondents said. That’s $10 less than the prediction for year-end 2023 in last quarter’s report. The market has been plagued by skepticism that OPEC+ will adhere to production cuts and concerns that supplies from the US are rising, though escalating geopolitical risks have recently introduced a premium. 

The Dallas Fed survey is widely read for its anonymous comments that offer an unfiltered view on a range of industry topics, from the White House to the Organization of Petroleum Exporting Countries. Executives were divided on strategy for next year. Many respondents from larger exploration companies said they plan to acquire assets, while those from smaller firms said they want to grow or maintain production.

“The policies of the administration continue to present significant headwinds especially for smaller independents,” one respondent said. “Access to capital is constrained for small projects less than $50 million in size.”

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