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The consolidation wave in the oil and gas sector is not letting up, with ConocoPhillips (NYSE:COP) in advanced talks to buy Marathon Oil (NYSE:MRO) in a potential all-stock deal, FT reports. The tie-up would value Marathon (MRO) at a "little over its current $15B market value" and would derail a bid by Devon Energy (NYSE:DVN). There is still a risk that the latest negotiations could fall apart or a rival offer could sink the takeover plan, but Marathon Oil (MRO) still rose on the news, up 4.5% in premarket trade.
Drill, baby, drill! The U.S. is currently producing over 13M barrels of crude per day, which is way more than any country on the globe, including Saudi Arabia. The output growth has helped tame gas prices and, perhaps more importantly, undermined the influence of OPEC and Russia following the invasion of Ukraine in 2022. This has clashed with the Biden administration's clean energy agenda, though for the time being, inflation concerns and energy independence seem to be the top priorities, especially if they can be paired with climate spending towards the green transition.
Producers also know that while times are good, demand can come down or eventually plateau, especially with the U.S. currently exporting more oil than nearly every member of OPEC. One doesn't have to look too far to the 2014-16 downturn, which hammered the industry and was largely driven by a supply glut. Boom-bust cycles are normal for the oil sector, but many are preparing in advance this time around, turning to mergers and consolidation to squeeze more profits from their production and raise their competitiveness as the cheapest barrels on the market.
Economies of scale: Dealmaking in recent months has seen Hess (HES) shareholders approve a $53B sale to Chevron (CVX), as well as Exxon's (XOM) all-stock transaction for Pioneer Natural Resources, which was valued at $60B. It didn't stop there, as energy-hungry companies looked to snap up important resources despite increased threats of antitrust scrutiny. Endeavor Energy Partners confirmed a $26B offer from Diamondback Energy (FANG), Occidental Petroleum (OXY) announced a $12B agreement to buy West Texas producer CrownRock, while APA (APA) inked a deal to purchase smaller rival Callon Petroleum for $4.5B.
More M&A
- Hess shareholders approve $53B sale to Chevron
- Exxon confirms deal to buy Pioneer Natural Resources for $59.5B in stock
- Diamondback Energy receives stockholder approval for proposed transaction with Endeavor Energy Resources
- Occidental signs $12B deal to buy Permian producer CrownRock
- APA Corp. to buy Callon Petroleum in $4.5B all-stock deal