The industry is rearranging itself
Next billion-dollar takeover in the US oil industry
February 12, 2024, 3:12 p.m
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The massive increase in energy prices after the Russian attack on Ukraine caused a boom for oil producers. Now the corporations are sitting on billions of dollars. The industry is using the money to finance gigantic acquisitions and mergers – and is making it clear that it will continue to rely on the raw material for a long time to come.
The two American oil companies Diamondback Energy and Endeavor Energy will join forces in the future. Endeavor will be bought at a price of 26 billion US dollars (around 24.1 billion euros) including debt, Diamondback announced in Midland, Texas. The merger is expected to be completed in the fourth quarter of the current year. This means the next big deal in the US oil industry is done.
Diamondback is paying for Endeavor with a combination of $8 billion in cash and 117.3 million Diamondback shares. Diamondback shareholders will hold around 60.5 percent of the newly created company, while Endeavor shareholders will hold around 39.5 percent.
Both Diamondback and Endeavor specialize in the extraction of shale gas and oil using the controversial method of fracking. Oil and gas are extracted from the rock using chemicals and high hydraulic pressure. The method is controversial, among other things, because it is considered to pose a threat to groundwater.
Both companies are based in Midland and drill for oil in the Permian Basin, America’s largest oil field in the states of Texas and New Mexico. Together they have the rights to 838,000 hectares of land and will be able to produce 816,000 barrels of oil equivalent per day in the future. Endeavor was seen as one of the last major merger candidates in the industry after a series of other acquisitions. The company reportedly also attracted interest from Exxon Mobil, Chevron and ConocoPhillips.
The consolidation of the US oil sector has made massive progress in the past few months. In January, the companies Chesapeake Energy and Southwestern Energy announced that Chesapeake would take over their competitor for $7.4 billion. Exxon acquired Pioneer Resources for $60 billion. Chevron wants to swallow Hess for $53 billion. Additionally, Occidental Petroleum has reached an agreement to purchase CrownRock for nearly $11 billion. The big oil companies want to secure additional land for drilling and fracking. As a result, ever larger companies are emerging in the previously fragmented industry.
The US energy companies currently have a lot of money. Their profits had increased sharply in 2022 as prices shot up after the start of Russia’s war of aggression against Ukraine. With the takeovers, they are making it clear that, despite the climate crisis, they are committed to the production of oil and natural gas in the long term.