SlavkoSereda/iStock via Getty Images
Mergers and acquisitions have been a major trend in the oil and gas sector in recent months, including deals worth more than $190 billion signed in 2023, but the topic is becoming more complicated as questions mount on several pending deals, notably that of Chevron (CVX) $53 billion proposal to acquire Hess (HE IS).
Hess reported this week for the first time that the deal with Chevron (CVX) could be delayed, after Exxon Mobil (XOM) filed for arbitration to preserve its rights to the massive oil discovery off Guyana – the the world’s fastest-growing major crude oil development and the crown jewel of Chevron’s push to buy Hess.
Such arbitration proceedings typically take 5-6 months, Exxon (XOM) Senior Vice President Neil Chapman said at a Morgan Stanley conference this week.
If Exxon’s (XOM) challenge blocks the merger, it would be the second time a major deal has slipped through Chevron’s (CVX) CEO Mike Wirth’s fingers, after his $33 billion bid for Anadarko in 2019 was was thwarted by a higher bid from Occidental Petroleum.
Wirth won a $1 billion breakup fee in the Anadarko loss, but if Chevron (CVX) ends up walking away from the deal with Hess (HES), Hess could potentially be off the hook for a $1 billion breakup fee. 7 billion dollars.
Analysts say the deal could go either way, Reuters reported in an analysis.
“It’s still very possible” that Exxon ( by MKP Advisors.
Another possibility is that Chevron (CVX) is forced to pay Exxon (XOM) to allow the deal to move forward, said analyst Paul Sankey of Sankey Research.
Nymex crude (CL1:COM) for April delivery fell 1.2% on Friday and Friday. -2.4% for the week at $78.01 a barrel, the lowest since Feb. 26, and May 1 Brent crude (CO1:COM) closed 1% lower on Friday and -1.7% for the week at $82.08/barrel.
Additionally, Nymex April natural gas (NG1:COM) fell 0.7% on Friday and 1.6% this week to $1.805/MMBtu.
ETF: (USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
Crude oil has been trading in a narrow range this year, and this week’s Brent price volatility was the narrowest since September 2021, according to Bloomberg.
Cuts by OPEC+ and rising tensions in the Middle East have been balanced by increased supply from non-cartel producers, with continued concerns over Chinese demand growth adding to the headwinds.
U.S. production is strong, “which is giving traders pause on how bullish things could get despite OPEC+ cuts and the potential flow of Iranian and Venezuelan barrels in the near future,” Tradition Energy’s Gary Cunningham said.
The oil and gas equity sector, represented by the Energy Select Sector SPDR ETF (NYSEARCA:XLE), concluded the week +1.1%.
Top 10 Gains in Energy and Natural Resources in the Last 5 Days: Nuscale Power (SMR) +59.1%Navios Maritime Partners (NMM) +28.9%MGE Energy (MGEE) +28%Perpetual Resources (PPTA) +24.5%TPI Composites (TPIC) +23%Harmony Gold Mining (HMY) +20.2%Silver Cats (CAT) +20.1%McEwen Mining (MUX) +18.5%Seabridge Gold (SA) +15.8%Coeur Mining (CDE) +15.5%.
Top 5 Countries Declining Energy & Natural Resources Over the Last 5 Days: Brenmiller Energy (BNRG) -18.6%Albemarle (ALB) -17.1%Amplify Energy (AMPY) -15.8%American Battery Technology (ABAT) -15.5%Sigma lithium (SGML) -15.2%.
Source: Barchart.com