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3 Stocks to Watch on Oil Companies' Rush to Drill Land
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The energy market has witnessed significant mega-merger deals as oil prices continue to stay in bullish territory. Oil and gas companies are swiftly pursuing additional drilling resources in key basins and shale plays, aiming to boost profits through increased production of these commodities.
High Oil Price & Merger Frenzy
The West Texas Intermediate crude has surpassed the $80 per barrel mark, which is highly conducive for exploration and production endeavors. Per the short-term energy outlook from the U.S. Energy Information Administration, the average spot price for West Texas Intermediate crude is likely to be $82.15 per barrel this year.
The handsome oil prices since Russia’s full-scale invasion of Ukraine two years ago in early 2022 and the conducive crude outlook may partly be prompting mega-merger deals in the energy space. Producing more of the commodity to capitalize on the promising crude prices will become comparatively easier while merging with rivals, thereby gaining rights to key oil and natural gas reserves.
Last month, the energy market witnessed a $26 billion deal between Diamondback Energy and Endeavor Energy Resources LP to create a leading oil and natural player in the Permian – the most prolific basin in the United States.
The merger will create significant shareholder value as the combined company will have a huge inventory of drilling sites and lower operating cost structures.
ExxonMobil has also entered into a staggering $59.5 billion all-stock deal to buy Pioneer Natural Resources (PXD - Free Report) , underscoring its motives to further strengthen its presence in the Permian. This is because Pioneer Natural is one of the foremost oil producers operating in the Permian Basin. With the deal closure, expected in the first half of 2024, Permian production of the integrated energy major will more than double to 1.3 million barrels of oil equivalent per day (MMBoE/D). Furthermore, ExxonMobil projected that this production figure will rise to an impressive 2 MMBoE/D by 2027.
Like ExxonMobil, Chevron also entered into a deal to diversify and upgrade its existing portfolio. Chevron inked a $53 billion agreement to acquire all the outstanding shares of Hess Corporation (HES - Free Report) . Upon the completion of the agreement, likely to be in the first half of 2024, Chevron is set to acquire a 30% ownership interest of Hess in Guyana's Stabroek Block, which houses the most significant crude discovery of the past decade and stands as one of the most lucrative discoveries globally.
Last Words
It is positive that oil and gas companies will generate increased cash flows for investors, relying on synergies and low-cost structures and expanding their footprint in key resources. However, the million-dollar question that will linger is, "Will higher production of fossil fuels exceed the safe limit for greenhouse gas emissions?"
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3 Stocks to Watch on Oil Companies' Rush to Drill Land
The energy market has witnessed significant mega-merger deals as oil prices continue to stay in bullish territory. Oil and gas companies are swiftly pursuing additional drilling resources in key basins and shale plays, aiming to boost profits through increased production of these commodities.
High Oil Price & Merger Frenzy
The West Texas Intermediate crude has surpassed the $80 per barrel mark, which is highly conducive for exploration and production endeavors. Per the short-term energy outlook from the U.S. Energy Information Administration, the average spot price for West Texas Intermediate crude is likely to be $82.15 per barrel this year.
The handsome oil prices since Russia’s full-scale invasion of Ukraine two years ago in early 2022 and the conducive crude outlook may partly be prompting mega-merger deals in the energy space. Producing more of the commodity to capitalize on the promising crude prices will become comparatively easier while merging with rivals, thereby gaining rights to key oil and natural gas reserves.
3 Stocks in the Radar
We are highlighting three significant merger deals that have occurred, providing incentives for investors to monitor companies such as Diamondback Energy, Inc. (FANG - Free Report) , Exxon Mobil Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) . All the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Last month, the energy market witnessed a $26 billion deal between Diamondback Energy and Endeavor Energy Resources LP to create a leading oil and natural player in the Permian – the most prolific basin in the United States.
The merger will create significant shareholder value as the combined company will have a huge inventory of drilling sites and lower operating cost structures.
ExxonMobil has also entered into a staggering $59.5 billion all-stock deal to buy Pioneer Natural Resources (PXD - Free Report) , underscoring its motives to further strengthen its presence in the Permian. This is because Pioneer Natural is one of the foremost oil producers operating in the Permian Basin. With the deal closure, expected in the first half of 2024, Permian production of the integrated energy major will more than double to 1.3 million barrels of oil equivalent per day (MMBoE/D). Furthermore, ExxonMobil projected that this production figure will rise to an impressive 2 MMBoE/D by 2027.
Like ExxonMobil, Chevron also entered into a deal to diversify and upgrade its existing portfolio. Chevron inked a $53 billion agreement to acquire all the outstanding shares of Hess Corporation (HES - Free Report) . Upon the completion of the agreement, likely to be in the first half of 2024, Chevron is set to acquire a 30% ownership interest of Hess in Guyana's Stabroek Block, which houses the most significant crude discovery of the past decade and stands as one of the most lucrative discoveries globally.
Last Words
It is positive that oil and gas companies will generate increased cash flows for investors, relying on synergies and low-cost structures and expanding their footprint in key resources. However, the million-dollar question that will linger is, "Will higher production of fossil fuels exceed the safe limit for greenhouse gas emissions?"