Wall Street Journal Oct 21, 2020 6:00am
Do we all think Halliburton could be eaten by bigger Fish. 🤔
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Misery Loves Company: Behind the Boom in Oil Stock M&A
Another day, another potential oil company merger.
Pioneer Natural Resources is reportedly interested in acquiring Texas shale driller Parsley Energy, according to a Wall Street Journal report. And if the deal is consummated, it would just be the latest in a wave of oil patch mergers.
On Monday, ConocoPhillips agreed to buy Concho Resources, while Chevron completed its $13 billion acquisition of Noble Energy earlier this month, and Devon Energy’s takeout of WPX Energy was announced at the end of September. One analyst even argued recently that Chevron and Exxon Mobil should join forces.
Oil firms aren’t merging from a position of strength. Energy components of the S&P 500 are down more than 50% this year, while crude oil prices are off by a third.
Why the urge to merge? The companies are trying to turn around their fortunes by getting bigger and cutting costs. Wall Street thinks it’s a good idea. A possible Pioneer-Parsley combo was called a “high-quality acquisition” by one analyst, while another sees it driving even more mergers among struggling oil companies. Investors apparently like it too: Parsley stock is up 12% in early Tuesday trading.
As they say: misery loves company.