US shale oil sector consolidates with mergers and energy price hikes

A group of “mini-giants” The oil and gas trade is surging among US shale producers, created from towering deals that industry executives hope will accelerate due to high commodity prices and lower extraction by European companies in the US. .

New players including Devon Energy Corp., EQT Corp, Continental Resources, Pioneer Natural Resources and Diamondback Energyare preparing other rounds of negotiations that will lead to agreements or mergers, according to interviews with a dozen sources.

“The conditions are in place for listed companies, particularly large independents and mid-caps, to use the deals to restructure and ensure they have adequate inventory to capitalize on this commodity price supercycle.”said Peter Bowdenglobal director of energy and power Jefferies.

Potential targets include Colgate Energy Partnerscontrolled by Pearl Energy Investments and NGPand Amedev IIbacked by EnCap Investments. Both were formed after their private equity owners merged companies to make them more attractive to big startups.

The trend is similar to a cycle from the 1990s, when quick mergers spawned the world’s biggest companies. BP, Exxon Mobil Corp. and Chevron Corp..

Just as then, this round of consolidation uses size to improve economies of scale. But this time, the calls “new giants” are coming together largely to exploit individual shale formations from United States.

Natural Pioneer increased its holdings in the Permian Basin with two agreements last year and now produces more oil and gas there than Exxon. EQT has become the largest producer of natural gas in the United States from its stronghold in shale marcellus from Pennsylvania and W.V..

Devon, the best-performing stock in the S&P 500 index in 2021, has also been eyeing deals, according to two investment executives, after losing last year when Shell sold assets in the heart of the US shale industry.

Devon and Exxon declined to comment when asked by Reuters. No executives from Continental, Diamondback, EQT and Pioneer responded to requests for comment.