11/06/2024 by Richard
The wave of mergers and acquisitions (M&As) in the US shale industry will help oil prices to stabilise according to Jason Gabelman, an analyst at TD Cowen.
The US oil giants Chevron and ExxonMobil, which make the Texaco and Mobil lubricant range, are already in the process of merging with Hess Corporation and Pioneer Natural Resources, respectively.
More recently, ConocoPhillips announced it was seeking to buy Marathon Oil (MRO) in an all-stock deal worth $17.1 billion.
Gabelman pointed out to Yahoo Finance that a few years ago, there were many smaller operators in the US shale industry that responded quickly to rises in prices, but this in turn led to oversupply and ultimately depressed oil prices. He said that with the bigger oil companies controlling a larger proportion of US oil production, they:
“….are going to be able to execute on moderate low to mid single digit oil production growth that should result in a healthier commodity backdrop, where they’ll be less responsive to spikes in oil prices and support higher and more stable oil prices.”
While the absence of spikes can have a downside as well as an upside for consumers, he said this would ultimately benefit consumers by making it easier to budget.
Many analysts believe further mergers and acquisitions will happen in North America, with there being about $80 billion worth of opportunities. Assets in the Permian Basin are particularly popular, but they fetch a premium as a result, so it is likely that further M&As may focus on other shale plays instead.
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