We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Conoco-Concho Merge: ETFs in Focus on 2020's Top Shale Deal
Read MoreHide Full Article
ConocoPhillips (COP - Free Report) has announced that it will purchase Permian-focused shale oil driller Concho Resources for $9.7 billion, in the largest shale deal this year. ConocoPhillips shares gained more than 1% after hours on Oct 19. Concho Resources shares were also up 0.6% after hours. In the key trading session of the day, shares were down due to the broader market selloffs.
ConocoPhillips agreed to buy Concho Resources for $9.7 billion, as the energy sector scrambled to consolidate in an attempt to survive an environment marked by lower fuel prices and demand. A few weeks back, there was the merger of Devon Energy and WPX Energy, which created a $12 billion entity with a robust upstream position in the Permian Basin.
Inside the Deal
The latest Conoco-Concho deal waslow-premium, all-stock in nature. It came as many U.S. shale companies have been struggling with losses due to weak crude prices.The deal swaps 1.46 shares of ConocoPhillips for each Concho share, at a premium of about 1.5% over its price on Oct 16.
Stable oil price is another reason for an uptick in energy sector consolidation. “While $40 oil is not high enough to restart the prolific shale machine, the absence of volatility is allowing producers time to take stock of how best to survive the ongoing Covid-19 downturn,”per the CEO of oilfield services company Canary, LLC, as quote don Forbes.
The purchase puts ConocoPhillips to the ranks of the top producers in the Permian Basin, and tags it as the largest U.S. independent oil and gas producer, pumping 1.5 million barrels per day (bpd). The deal will give ConocoPhillips an opportunity to create low-cost supply,” per the CEO Ryan Lance, adding Concho has “a low-cost supply that fits,” quoted on Reuters.
The fifth-largest producer by volume in the Permian, Concho pumps about 319,000 bpd, per Reuters. It has been a lucrative acquisition candidate due to its large production base, per an M&A analyst at consultancy Enverus.
The analyst went on to highlight that Concho has “scant drilling acreage on federal lands, a plus given Democratic party presidential candidate Joe Biden’s proposal to ban new fracking permits on government property,” as quoted on Reuters. Meanwhile, ConocoPhillips is a major producer in two other U.S. shale fields but pumps about 50,000 bpd into the Permian.
Against this backdrop, below we highlight a few energy ETFs that have considerable exposure to either of the companies or both at a time. These ETFs may benefit from the deal in the coming days.
ETFs in Focus
iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report)
ConocoPhillips – 15.63%; Concho Resources – 4.6%
First Trust Indxx Global Natural Resources Income ETF (FTRI - Free Report)
Image: Bigstock
Conoco-Concho Merge: ETFs in Focus on 2020's Top Shale Deal
ConocoPhillips (COP - Free Report) has announced that it will purchase Permian-focused shale oil driller Concho Resources for $9.7 billion, in the largest shale deal this year. ConocoPhillips shares gained more than 1% after hours on Oct 19. Concho Resources shares were also up 0.6% after hours. In the key trading session of the day, shares were down due to the broader market selloffs.
ConocoPhillips agreed to buy Concho Resources for $9.7 billion, as the energy sector scrambled to consolidate in an attempt to survive an environment marked by lower fuel prices and demand. A few weeks back, there was the merger of Devon Energy and WPX Energy, which created a $12 billion entity with a robust upstream position in the Permian Basin.
Inside the Deal
The latest Conoco-Concho deal was low-premium, all-stock in nature. It came as many U.S. shale companies have been struggling with losses due to weak crude prices.The deal swaps 1.46 shares of ConocoPhillips for each Concho share, at a premium of about 1.5% over its price on Oct 16.
Stable oil price is another reason for an uptick in energy sector consolidation. “While $40 oil is not high enough to restart the prolific shale machine, the absence of volatility is allowing producers time to take stock of how best to survive the ongoing Covid-19 downturn,”per the CEO of oilfield services company Canary, LLC, as quote don Forbes.
The purchase puts ConocoPhillips to the ranks of the top producers in the Permian Basin, and tags it as the largest U.S. independent oil and gas producer, pumping 1.5 million barrels per day (bpd). The deal will give ConocoPhillips an opportunity to create low-cost supply,” per the CEO Ryan Lance, adding Concho has “a low-cost supply that fits,” quoted on Reuters.
The fifth-largest producer by volume in the Permian, Concho pumps about 319,000 bpd, per Reuters. It has been a lucrative acquisition candidate due to its large production base, per an M&A analyst at consultancy Enverus.
The analyst went on to highlight that Concho has “scant drilling acreage on federal lands, a plus given Democratic party presidential candidate Joe Biden’s proposal to ban new fracking permits on government property,” as quoted on Reuters. Meanwhile, ConocoPhillips is a major producer in two other U.S. shale fields but pumps about 50,000 bpd into the Permian.
Against this backdrop, below we highlight a few energy ETFs that have considerable exposure to either of the companies or both at a time. These ETFs may benefit from the deal in the coming days.
ETFs in Focus
iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report)
ConocoPhillips – 15.63%; Concho Resources – 4.6%
First Trust Indxx Global Natural Resources Income ETF (FTRI - Free Report)
ConocoPhillips – 8.94%
VanEck Vectors Unconventional Oil & Gas ETF
ConocoPhillips – 8.25%; Concho Resources – 4.5%
John Hancock Multi-Factor Energy ETF
ConocoPhillips – 6.00%; Concho Resources – 3.1%
iShares U.S. Energy ETF (IYE - Free Report)
ConocoPhillips – 5.63%
Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report)
ConocoPhillips – 5.21%; Concho Resources – 5.3%
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>