Exxon and Chevron fortify North American energy reserves with major acquisitions

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Exxon and Chevron fortify North American energy reserves with major acquisitions
Credit: © Reuters.

Exxon's recent acquisition of Pioneer Natural Resources (NYSE: PXD ) for $59.5 billion and Chevron (NYSE: CVX )'s imminent takeover of Hess (NYSE: HES ) for $53 billion have significantly reshaped the energy sector this month. These deals have not only strengthened Exxon's North American energy production and reserves but also equipped Chevron with a diverse array of domestic and international assets.

Pioneer Natural Resources, a leading onshore tight oil producer in the United States with operations in the Permian Basin, and Hess, with substantial shale holdings in North Dakota's Bakken Formation and a valuable 30% stake in the Stabroek Block offshore from Guyana, are bringing significant value to their acquirers. These transactions rank as the third and fourth-largest upstream oil and gas deals in history, marking a pivotal moment for the future of US shale output, which has emerged as a significant source of new global oil and gas over the past decade.

The wave of consolidation signifies a shift in oil companies' mindset towards profitability over growth at all costs. This is reflected in the mergers and acquisitions among many private equity-backed corporations, and European oil companies like Shell (LON: SHEL ) and Equinor selling their shale holdings. ExxonMobil (NYSE: XOM )'s acquisition will now command 15% of Permian oil output. Other consolidation candidates include Occidental (NYSE: OXY ), ConocoPhillips (NYSE: COP ), EOG, Diamondback (NASDAQ: FANG ), Coterra, Devon, APA, Marathon, Chesapeake and gas-focused EQT (ST: EQTAB ).

Despite a reduction in M&A activity among oil E&P companies to $14 billion in Q3 from $24 billion in Q2, Enervus anticipates a rebound in dealmaking among smaller entities, predominantly within the shale patch. Larger independents may eye targets such as Devon Energy (NYSE: DVN ), Marathon Oil (NYSE: MRO ), Southwestern Energy (NYSE: SWN ), and Chesapeake Energy (NYSE: CHK ).

In contrast to their American counterparts, European super-majors such as BP (NYSE: BP ), TotalEnergies (EPA: TTEF ), Eni or Equinor have been noticeably absent from significant upstream acquisitions. While TotalEnergies continues seeking new oil and gas under newly appointed Shell chief executive Wael Sawan, they are still heavily focused on their net-zero strategies and low-carbon businesses. This marks a divergence in strategies between big European and US oil companies, with Chevron and ExxonMobil betting firmly on a strong future for oil.

InvestingPro Insights

As we delve into the recent acquisitions by Exxon and Chevron, it's beneficial to consider some InvestingPro Tips and real-time data. Exxon (XOM) has been a consistent performer with its dividend being raised for 41 consecutive years. It operates with a moderate level of debt and is predicted to be profitable this year. Similarly, Chevron (CVX) has raised its dividend for 36 consecutive years and is also predicted to be profitable this year.

Looking at InvestingPro's real-time data, Exxon has a market cap of $419.59B and a P/E ratio of 10.51. The company has seen a revenue of $349.84B in the last twelve months as of Q3 2023. Chevron, on the other hand, has a market cap of $274.95B and a P/E ratio of 10.77. It has generated a revenue of $202.73B in the same timeframe.

These metrics and tips underline the financial stability and profitability of both companies. As such, their recent acquisitions can be seen as strategic moves to consolidate their positions in the energy sector. For more in-depth insights and tips, consider exploring the InvestingPro platform which hosts an extensive list of tips for various companies.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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