ConocoPhillips is buying Marathon Oil as US production greases the merger wheels
Add more oil… ConocoPhillips yesterday agreed to buy its significantly smaller rival Marathon Oil. The deal — valued at more than $17B — would help Conoco keep pace with larger competitors who’ve been on a buying spree. US oil titans have struck record profits in recent years, giving them plenty of cash to scoop up sought-after oil fields owned by smaller players in regions like the Southwest’s Permian Basin and the Gulf of Mexico.
Drinking their milkshakes: The value of oil and gas industry M&A deals in the US last year reached $250B (the highest level in a decade). The trend has continued with $51B in deals last quarter. 60% of those were in the Permian Basin.
Slick moves: Chevron’s $53B Hess acquisition was just approved by Hess shareholders. Diamondback Energy bought Endeavor in February for $26B, outbidding Conoco. And Exxon snatched up Pioneer Natural Resources last year for $60B.
Why you gotta be so crude?… For the past six years, the US has been pumping more crude oil than any other country (45% more than Saudi Arabia). Drilling has picked up under President Biden: as of last fall, his admin had approved more oil and gas drilling permits on public lands than former President Trump had at the same point in his presidency. During his 2020 campaign, Biden promised to end drilling on public lands, but the White House recently finalized a rule making the practice about 10x more expensive. The US is expected to be responsible for more than a third of oil and gas production increases between now and 2035.
Oil’s doubling down on oil… The International Energy Agency said oil demand would peak by 2030, but Big Oil’s buying up fields as if the boom will last. The acquisition spree represents a big bet on future fossil-fuel demand, and it doesn’t mesh with climate goals: experts say eliminating greenhouse-gas emissions by 2050 is crucial to preventing the worst effects of the climate crisis.