Pioneer Natural Resources Co. on Tuesday announced the acquisition of Parsley Energy Inc. in a $4.5-billion low-premium deal. The buyout came as consolidation in the US shale industry accelerated, propelled by coronavirus-induced oil demand and price collapse. The pandemic has forced struggling shale oil and gas producers to slash costs and ramped up pressure on them to absorb smaller rivals. Crude pricing remains relatively weak, while drillers still need to invest in maintaining output rates.
Previously, ConocoPhillips purchased Concho Resources Inc for $9.7 billion, making it the largest shale deal so far this year. Chevron Corp also acquired Noble Energy for $4.2-billion. Meanwhile, Devon Energy Corp bought rival WPX Energy Inc in a $2.6 billion all-stock, low-premium deal.
Matthew Portillo from Tudor, Pickering, Holt & Co., said PDC Energy Inc and Cimarex Energy Co were top candidates for next consolidations. EOG Resources Inc, Marathon Oil Corp, Apache Corp, and financial firms might be the subsequent buyers, Portillo said. At the same time, European oil majors are ramping up focus on renewable energy, while ExxonMobil Corp is cutting costs, so they will likely avoid adding shale assets.
Law firm Haynes and Boone said bankruptcies in the North American energy sector are up 21% so far this year. Analysts predict that banks will likely take over firms and merge them into larger entities. Despite the consolidation, these merged companies will have to balance between paying out dividends to shareholders and spending to keep pumping oil.
US shale oil production rebounded during the summer, signalling a recovery after coronavirus-related lockdowns. However, with less upstream investment, shale crude output is expected to decrease by 123,000 bpd in November, the US Energy Department said. That would be the most significant production drop since May.
