"Major oil companies make moves in megamerger frenzy"

" Major oil companies make moves in megamerger frenzy \r\n\r\nOver the last year, several oil and gas majors have undergone high-profile mergers as we enter the era of the megamerger. Big Oil in the U.S. appears to be undergoing a transition, as several well-known companies make large acquisitions to solidify their position in the future of oil and gas. In October, both Chevron and Exxon announced a major new deal, with Occidental following in December, and Diamondback in February, suggesting this is the new direction that U.S. oil and gas is going to go from now on.\r\n\r\nIn October, Chevron announced it was buying Hess for $53 billion in stock. This provided Chevron with a 30 percent stake in Guyana\u2019s Stabroek Block, giving the company a piece of an 11 billion barrel pie and a future in \u201clow-carbon\u201d oil production. This merger demonstrates Chevron\u2019s aim to diversify its operations, allowing it to expand to new locations in Guyana and North Dakota \u2013 through Bakken shale operations. While it added just 386,000 bpd to Chevron\u2019s output, it provides significant potential for future production.\r\nThat same month, Exxon Mobil announced it had purchased Pioneer Natural Resources for $59.5 billion in an all-stock deal. This is Exxon\u2019s largest merger since its acquisition of Mobil. In contrast to Chevron, this deal enhanced Exxon\u2019s position in regions of existing operations, doubling its production volume in the Permian Basin. The merger added 711,000 bpd to Exxon\u2019s portfolio.\r\n\r\nThe mergers demonstrated clear ambitions from the two companies to continue investing in oil and gas operations, so long as the global demand for crude remains high. This follows several other mergers in the North American shale space last year, with a few large companies absorbing smaller operations to boost their output in the region. Bob McNally, the president of Rapidan Energy Group, stated, \u201cThese megadeals are just a prelude to this large investment wave I expect in coming years.\u201d He added, \u201cThese deals signify the shift from a multi-year bust phase in oil that began in 2014 to a multi-year boom phase that should last well through this decade.\u201d\r\n\r\nIn December, another megamerger took place when Occidental Petroleum Corporation acquired local competitor CrownRock Minerals in a $12 billion deal. The deal is expected to be completed in the first quarter of this year. The merger supports CrownRock\u2019s plan to develop a 100,000-acre space in the Midland Basin, which forms part of the Permian and produced 15 percent of U.S. crude in 2020. It will add 170,000 bpd of oil to Occidental\u2019s output and add 1,700 undeveloped locations in the Permian to its portfolio. Occidental will finance the deal through $9.1 billion in debt and about $1.7 billion in common stock. This marks a distinct shift in the region as CrownRock is one of the last major private producers in the Permian, alongside Endeavor Energy Resources.\r\n\r\nProduction in the Permian was once dominated by small producers that deployed new production techniques to access vast amounts of oil in the regions that many of the oil majors overlooked, establishing the U.S. as the world\u2019s biggest crude producer. This encouraged large public companies to launch operations in the region, in addition to their global operations. This was only made possible after fracking technology was started being used, unlocking oil that was previously trapped in the region. This led a large number of companies to operate in the region. Mark Viviano, a managing partner at investment firm Kimmeridge Energy Management, explained \u201cConsolidation is the last piece of the puzzle in rationalizing the shale industry.\u201d\r\n\r\nThis month, solidifying the shift in the region, Diamondback Energy announced plans to buy Endeavor in a $26-billion merger. This is expected to boost Diamondback\u2019s value to $50 billion. There were rumours that Diamondback\u2019s rival ConocoPhillips was also interested in purchasing Endeavor. The deal provides Diamondback with an additional 400,000 bpd of output in the Permian.\r\nDiamondback\u2019s CEO Travis Stice, stated, \u201cThis is a combination of two strong, established companies merging to create a \u2018must own\u2019 North American independent oil company.\u201d He added that the company would \u201chave industry-leading depth and quality that will be converted into cash flow with the industry\u2019s lowest cost structure\u201d.\r\n\r\nThe wave of megamergers has been spurred by higher oil prices over the last couple of years, and crude shortages following the sanctions imposed by the U.S. and Europe on Russian energy, following Russia\u2019s invasion of Ukraine. Oil companies in the U.S. have been racing to increase their crude output to meet the growing demand for alternative supply chains. Several companies are using the massive profits they have earned over the last two years to invest in mergers, solidifying their position in U.S. oil production. This will reduce the number of companies operating in the U.S. oil regions and ensure a few oil majors\u2019 positions in the future of the industry."

"Major oil companies make moves in megamerger frenzy"

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