Page 9 - NorthAmOil Week 42

NorthAmOil COMMENTARY NorthAmOil

US oil and gas M&A activity

gains momentum

Two further major M&A deals involving US oil producers have been

confirmed over the past week as consolidation picks up

US AFTER a lacklustre start to the year, mergers and ConocoPhillips and Concho
acquisitions (M&As) are picking up in the US, The ConocoPhillips-Concho transaction is val-
WHAT: and especially in the shale patch. The recent spate ued at $9.7bn, making it the third-largest US
Two further M&A deals of deal-making started with Chevron’s move to energy deal this year. It represents a 15% pre-
between US producers acquire Noble Energy, announced this summer mium to the companies’ closing share prices on
have been confirmed. and recently completed. Several large deals have October 13, with Concho investors standing to
followed suit, including Southwestern Energy’s receive 1.46 shares of ConocoPhillips stock for
WHY: move to acquire Montage Resources in an Appa- each of their own.
Producers are seeking to lachian Basin tie-up and the “merger of equals” For ConocoPhillips this deal will bolster its
achieve scale, synergies between Devon Energy and WPX Energy. shale holdings, transforming its position in the
and cost savings through Over the past week, two further major prolific Permian Basin. The combined company
consolidation. deals have been confirmed following initial will have an enterprise value of around $60bn,
media reports that they were imminent. In and will offer a “superior investment choice” to
WHAT NEXT: the first, ConocoPhillips confirmed its acqui- shareholders, ConocoPhillips said in an Octo-
Analysts believe a handful sition of Concho Resources, after Bloomberg ber 19 statement. The combined portfolio will
of takeover candidates cited sources familiar with the matter as say- comprise a resource base of roughly 23bn bar-
remains among shale ing the two were close to finalising a deal. (See rels of oil equivalent (boe) with a cost of supply
operators. NorthAmOil Week 41) Then Pioneer Natural below $40 per barrel of West Texas Intermediate
Resources confirmed Wall Street Journal and (WTI) and an average cost of supply less than
Financial Times reports that it was acquiring $30 per barrel WTI. Following the deal’s com-
Parsley Energy. pletion, the combined company will produce
Like a number of recent mergers, the latest 1.5mn barrels of oil equivalent per day (boepd).
deals are both all-stock transactions, illustrating The two companies expect to achieve around
producers’ unwillingness to spend money under $500mn per year of cost and capital savings by
current market conditions. And given that three 2022 thanks to the transaction.
out of four companies involved are pure-play Analysts commented that ConocoPhillips’
shale producers – with ConocoPhillips the move showed that big oil companies were now
exception thanks to its mix of conventional and ready to use this year’s industry downturn and
unconventional operations – they illustrate that the resulting decline in asset valuations to build
shale acreage remains an appealing target. scale in shale. And Concho was seen as one of a

Week 42 22•October•2020 www. NEWSBASE .com P9