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U.S. Oil Merger Talks Surface As WTI Reaches $120

Shale oil producers Oasis Petroleum and Whiting Petroleum are nearing a deal to merge their operations, the Wall Street Journal has reported, citing people close to the negotiations.

If the talks end with an agreement, the deal—all-stock—could be announced as early as this week, the sources said. The value of the combined company could reach $6 billion.

The U.S. shale oil industry saw a wave of large-size mergers and acquisitions amid the pandemic, and analysts expect the consolidation drive to continue this year as well.

Upstream M&A deal flow could hit the highest in years in 2022 if commodity prices hold steady, WoodMac analysts said in their 2022 outlook of the global upstream published in January.

“Companies’ ability to finance and execute acquisitions improved immeasurably through the course of 2021 – we can see this clearly in the increasing number of larger cash asset deals. If commodity prices remain elevated, the ability to execute transactions will only increase through 2022,” the authors of the outlook said.

GlobalData reported last month that 2021 had seen as many as 74 deals in oil and gas worth $1 billion and more. Most of the M&A activity took place in the upstream segment, as deals worth a total of $120 billion closed last year. Shale was one of the drivers of that consolidation wave, GlobalData analysts noted, adding the Permian was the focus of attention among dealmakers.

Right now, shares in the shale industry are on the rise in tune with international oil prices, and both Oasis and Whiting have benefited from the rally, especially as they had already started streamlining their operations in response to pandemic pressures.

The WSJ recalls that both companies had to file for Chapter 11 bankruptcy protection when oil prices crashed in the early days of the pandemic, with demand destruction at unprecedented levels.

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By Charles Kennedy for Oilprice.com

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