Oxy

The fact is, many major E&P acquisitions include at least some production assets that don’t align with the acquiring company’s long-term strategic plans. Also, it’s often true that big-dollar M&A increases the buyer’s debt level — and it’s typical in such cases that the company commits to quickly reducing its debt through the divestiture of non-core assets. As we discuss in today’s RBN blog, there’s a lot of that going on now, and in many cases smaller, private-equity-backed producers are scooping up the acreage and production being sold. 

The budget reconciliation bill signed into law July 4 by President Trump — known as the One Big Beautiful Bill Act (OBBBA) — dramatically scales back a number of clean-energy tax credits and adds a new layer of complexity for some projects, leading to a lot of doom and gloom around clean-energy initiatives, but the new legislation is a big positive for the carbon-capture industry. In today’s RBN blog, we look at how changes to the 45Q tax credit could help advance carbon-capture efforts while also providing a boost to producers of crude oil and blue hydrogen. 

There’s been a frenzy of M&A activity in the Permian Basin the past couple of years, and in recent months many of the acquiring E&Ps have reviewed their expanded base of assets, determined which acreage, wells and future well sites are core to their business going forward, and initiated the process of divesting the rest. At the same time, others — including some producers that were part of the merger mania — are on the hunt for what they see as underappreciated assets with the potential to shine. Folks, we’re in the early stages of what you might call “The Great Permian Reshuffling” — a rapid-fire exchange of upstream assets in the nation’s most prolific shale play. In today’s RBN blog, we discuss a few of the most noteworthy “bolt-on” deals and what they tell us. 

It may be considerably smaller in scale than the recent ExxonMobil/Pioneer and Chevron/Hess megadeals, but Occidental Petroleum’s announcement that it will acquire privately held CrownRock LP for $12 billion is remarkable in its own right. Among other things, the deal will give Delaware Basin-focused Oxy a strong foothold in the absolute core of the Midland Basin, supercharge its free cash flow and — despite increasing Oxy’s debt in the short term — provide a pathway for the company to return much more money to shareholders via dividends and stock buybacks in the years ahead. In today’s RBN blog, we examine Oxy’s planned acquisition of CrownRock and what it means for the acquiring company and the Permian itself. 

On July 20, 2020, Chevron struck the first major energy sector deal since the onset of the pandemic, announcing a $13 billion agreement to acquire U.S. E&P Noble Energy. The transaction comes 15 months after the oil major bowed out of a bidding war with Occidental Petroleum to acquire Anadarko Petroleum, a landmark, $56 billion deal in which the winner may eventually end up as the loser after taking on massive debt. Oxy is just one example of how the sharp decline in oil demand and prices has ravaged producer cash flows and earnings, virtually freezing the M&A market. Despite widespread speculation that a resumption in deal activity would target the most distressed E&Ps, Chevron has broken the market wide open with a blockbuster deal for a premier E&P. The target this time, Noble Energy, has a portfolio very similar to that of Anadarko, and is being acquired at a small fraction of the cost. Today, we examine the strategies that drove this transaction, the impacts on buyer and seller, and the implications for the upstream M&A market going forward.

With Broadway theaters shuttered and Hollywood studios on lockdown, one of the most compelling long-term American dramas is the ongoing saga of U.S. E&P Occidental Petroleum (Oxy). Act One was a compelling David-vs.-Goliath story as Oxy battled oil major Chevron in early 2019 to acquire Anadarko Petroleum and its prime Permian acreage. Among the most fascinating elements was the supporting cast, which featured business legend Warren Buffett, who contributed a critical $10 billion to push Oxy’s deal over the top, versus billionaire investor and corporate raider Carl Icahn, who led an unsuccessful struggle to stop what he called “the worst deal I’ve ever seen.” Oxy snagged Anadarko with a winning bid of $57 billion, the fourth-highest total for an oil and gas transaction and a 20% premium to Chevron’s offer, and predicted strong future production, dividend, and cash flow growth. But those optimistic projections have been upended in the ongoing Act Two, as plunging oil demand and prices from the COVID-19 pandemic have stymied planned asset sales and ravaged cash flows. Oxy has responded by reining in spending, revamping operations, refocusing divestment plans, and restructuring debt. But is it enough? Today, we analyze the company’s current strategies and financial maneuvering, as well as the near-term outlook, under a range of oil price scenarios.

Oil-Weighted exploration and production companies (E&Ps) are slashing capital spending in 2015, as they need to regain control of their costs in today’s lower oil price environment. With robust oil prices over the past three years, these companies only posted middling profitability as capital and operating costs ate up much of their incremental revenue. The Large Oil Weighted E&Ps are cutting back less than the Small/Mid-Sized Oil Weighted E&Ps as they are more financially secure and have more ability to spend through the price cycle. The Small/Mid-Sized Oil Weighted E&Ps are focused on getting their spending in line with cash flows and to get to a point where they are self-funding their capital investment. Today we explore how each of the companies in the two oil-weighted peer groups is trying to resolve these issues.