The two largest oil companies in the United States, Exxon and Chevron (NYSE:CVX), were in talks to merge amid the pandemic crisis last year, the Wall Street Journal has reported, citing unnamed sources in the know.
The report noted that such a tie-up would be one of the biggest corporate mergers ever and create a company that could be worth more than $350 billion based on Exxon’s and Chevron’s current valuations.
Yet such a deal, if it is still on the table, would also face considerable regulatory hurdles, the Wall Street Journal’s Christopher M. Matthews, Emily Glazer, and Cara Lombardo noted. The two companies are the largest descendants of the Standard Oil monopoly that the government broke up in the early 20th century, and a merger would undoubtedly raise some regulatory eyebrows.
Even if the Exxon-Chevron talks last year did not end in a deal, there were several large acquisitions in the U.S. oil space in 2020. The biggest was Conoco Phillips’ acquisition of Concho Resources for some $9.7 billion. Next, in terms of value, was Pioneer Natural Resources’ purchase of Parsley Energy for close to $8 billion, followed by Chevron’s $5-billion acquisition of Noble Energy, which was another all-stock deal like the Conoco-Concho tie-up.
Of course, none of these deals could compare to a merger between Exxon and Chevron in terms of value or effect on the industry. It has been decades since a deal of this size has taken place. The last deals of this size was when Chevron merged with Texaco and Exxon merged with Mobil.
The Wall Street Journal reported that Chevron’s CEO and chairman, Mike Wirth, was generally in favor of further consolidation in the oil space. Consolidation, according to him, would boost the efficiency of the industry.
“As for larger-scale things, it’s happened before,” Wirth told the WSJ in an interview at the release of the company’s fourth-quarter results. “Time will tell.”
Meanwhile, this year U.S. producers are expected to continue shedding non-core assets as they streamline their operations in response to the new normal in supply, demand, and prices. More mergers may be on the table as some players in the field find it difficult to survive on their own.
By Irina Slav for Oilprice.com
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