Daily Energy Blog

Rumors about potential oil and gas mergers are always swirling, but the announcement of ExxonMobil’s record-breaking deal to acquire Pioneer Natural Resources a couple of weeks ago generated a fever pitch of speculation about potential matchups. In the past week, we’ve seen media reports of possible courtships between Devon Energy and Marathon Oil and then Chesapeake Energy and Southwestern Energy. However, it was Chevron that shocked the oil patch by swiping right on former integrated oil company Hess Corp., opting for a $60 billion acquisition of an E&P with no Permian Basin exposure. In today’s RBN blog, we analyze the drivers and implications of what is now the second-largest U.S. upstream transaction ever. 

Sometimes, courtship is better the second time around. After some previous rumors and flirting with a deal in the spring of 2023, ExxonMobil, the largest international integrated oil company, reached an agreement to acquire Pioneer Natural Resources, the largest pure-play Permian producer, for $64.5 billion, the largest-ever U.S. upstream transaction. In today’s blog, we analyze the deal that would make ExxonMobil the top Permian producer, including shifts in the focus and depth of its upstream portfolio, the integration with its existing midstream and downstream infrastructure, and its energy transition goals.

Even now, three-plus years after the start of the oil and gas industry’s biggest consolidation in a quarter century, hardly a month goes by without another major M&A announcement. Just this week, Civitas Resources said it will acquire acreage and production in the Permian from Vencer Energy for $2.1 billion. The primary drivers of these deals — many of which are valued in the billions of dollars — are clear. Among other things, E&Ps are seeking scale and the economies of scale that come with it. They also have come to believe that it makes more sense to grow production through M&A than through aggressive capital spending. And, for some producers not yet involved in the all-important Permian, acquiring even a smaller E&P there provides a foothold to build on. In today’s RBN blog, we discuss highlights from our newly released Drill Down report on the past 12 months of upstream M&A activity in the U.S. oil patch.

Is the glass half-full or half-empty? The answer to that age-old question usually indicates whether a particular situation is a cause for optimism or pessimism. That question is particularly appropriate when trying to place in perspective the cyclical movement of the earnings and cash flows of U.S. exploration and production (E&P) companies, including returns that have steadily declined with commodity prices over the last year. In today’s RBN blog, we analyze Q2 2023 E&P earnings and cash flows and provide some perspective on the past and future profitability of U.S. oil and gas producers.

What a difference a year makes! The summer of 2022 was a golden age for U.S. E&Ps that embraced a dramatic shift in their business model from prioritizing growth to a focus on maximizing cash flows and emphasizing shareholder returns. Oil prices over $90/bbl and gas prices hovering about $7/MMBtu filled their coffers and funded lavish increases in share repurchases and dividends. But those golden days quickly faded as oil prices retreated and gas prices plunged 66% to just above $2/MMBtu. In today’s RBN blog, we explain how E&Ps are scrambling to sustain shareholder return programs in the face of shrinking cash flow.

Over the past four years, Energy Transfer (ET) has completed several major acquisitions, all aimed at giving the company the additional size and reach it will need to compete in an increasingly consolidated midstream sector. On Wednesday, ET announced one of its biggest purchases yet: a $7.1 billion deal to acquire Crestwood Equity Partners, which has extensive gathering and processing assets in the Permian, Powder River and Williston basins, as well as NGL terminal and storage facilities east of the Mississippi. In today’s RBN blog, we look at how the addition of Crestwood’s holdings will extend ET’s value chain and complement its fractionation assets at Mont Belvieu and its export capabilities at both its Nederland and Marcus Hook terminals.

On average, the landowners and other entities that own mineral and royalty interests in producing oil and gas wells receive about 20% of the gross revenues generated by those wells — and do so without any responsibility for the significant costs and complications associated with well development and production. Mineral and royalty interests have traditionally been a highly fragmented market, with most held and passed down through generations by landowners or purchased by individual investors. However, competition for these interests has become more heated in recent years with the creation of large publicly owned and private-equity-funded consolidators and a new emphasis by E&P companies on adding these higher-margin slices of revenue from leases they own and operate. In today’s RBN blog, we explain mineral and royalty interests and analyze the developments in this massive $700 billion market.