Seatoday.com, Jakarta Energy heavyweights Chevron and Exxon Mobil announced shiny new acquisitions this month — and some industry watchers say it could be the start of more multibillion megadeals to come.
Chevron on Monday said it’s buying Hess for $53 billion in stock, allowing Chevron to take a 30% stake in Guyana’s Stabroek Block — estimated to hold some 11 billion barrels of oil.
The announcement comes just weeks after Exxon Mobil announced its purchase of shale rival Pioneer Natural Resources for $59.5 billion in an all-stock deal. While this marks Exxon’s largest deal since its acquisition of Mobil, the merger would also double the oil giant’s production volume in the largest U.S. oilfield, the Permian Basin.
Exxon will see more immediate returns and Pioneer alone would add 711,000 barrels per day, he said comparing it to just 386,000 barrels per day from Hess.
The deals by the two largest publicly traded major oil companies appear to confirm that crude oil demand will remain strong over the long term, said Andrew Woods, Mintec’s industrial analyst.
Dan Pickering, founder of Pickering Energy Partners, echoed similar sentiments, saying that both energy behemoths believe oil demand has not yet peaked.
“We are clearly entering into a period of consolidation,” Pickering said, adding it is not just megadeals that the oil industry will be seeing, but also many “merger-of-equals” amongst small or mid-sized companies with market capitalizations between $3 billion to $30 billion.
Pickering said investors currently do not want volume growth, but prefer capital discipline — a shift from focusing on production volume to a focus on financial value.
“Instead of drilling to grow production or cash flow, companies are now combining to gain scale, lower costs and grow earnings and cash flow without meaningful incremental volumes,” he said.
Recommended Article
