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U.S. shale mergers accelerate, with Pioneer-Parsley deal looming
Oct 20, 2020
HOUSTON/NEW YORK (Reuters) - Consolidation in the U.S. shale industry is accelerating, ratcheting up pressure on oil and gas producers to gobble up smaller rivals, analysts and executives said.
FILE PHOTO: A horizontal drilling rig on a lease owned by Parsley Energy operates in the Permian Basin near Midland, Texas U.S. August 23, 2018. REUTERS/Nick Oxford/File Photo
Among those in play, Pioneer Natural Resources Co PXD.N , one of the largest independent shale operators, is considering a low-premium buyout of Parsley Energy Inc PE.N , which could be announced as early as Tuesday, according to sources.
The coronavirus pandemic has slashed oil demand and forced struggling shale producers to cut costs as they cope with a suboptimal $40-per-barrel crude price, an uncertain outlook, and the need to invest to keep production flat due to the swift rate at which shale well output declines. Global majors are not likely to step in, so analysts expect the dwindling universe of notable producers to seek out deal partners.
“The universe of companies with which you can combine is shrinking by the day,” said Matthew Portillo, managing director at investment bank Tudor, Pickering, Holt & Co.
On Monday, Concho Resources Inc CXO.N agreed to sell to ConocoPhillips COP.N for $9.7 billion. That followed Chevron Corp's CVX.N $4.2 billion purchase of Noble Energy NBL.MX this month, and Devon Energy Corp's DVN.N $2.6 billion all-stock, low premium buy of rival WPX Energy Inc WPX.N in September. European majors are avoiding new oil and gas purchases and Exxon Mobil Corp XOM.N is cutting costs, making them unlikely candidates for a deal.
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