Energy M&A flows downstream from Big Oil

Enerplus

22/02/2024 17:19

(The author is a Reuters Breakingviews columnist. The opinions
expressed are their own.)
       NEW YORK, Feb 22 (Reuters Breakingviews) - The oil deals
keep flowing downstream. Chord Energy’s  CHRD.O  is the latest,
saying on Thursday that it would join forces with Canada’s
Enerplus  ERF.TO . At only about 287,000 of combined barrels of
oil equivalent last quarter, the $11 billion mostly-stock
combination lacks Exxon Mobil’s  XOM.N  or Chevron’s  CVX.N 
industry-shaking acquisition plans. And instead of operating in
the fast-growing fields of Texas or Guyana, it features North
Dakota’s drying Williston Basin. It makes sense all the same.
    Chord reckons it can wring out some $150 million of annual
drilling, administrative and lease-related operating expenses,
and pegs their value at more than $750 million today. The
estimate sounds conservative, at just 7% of the combined market
values before the news, but investors are not even giving them
full credit for those savings.
    Valuable synergies should nevertheless keep M&A activity
bubbling along in the industry. Moreover, with fossil fuels
waning, such opportunities can’t be dismissed by management.
Even if they’re not necessarily in Big Oil’s crosshairs, smaller
drillers can find plenty of helpful deal permutations.(By Rob
Cyran)
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 (Editing by Jeffrey Goldfarb and Aditya Sriwatsav)