Occidental Petroleum Corporation (OXY)
- Bloomberg
BP Is Said to Mull Sale of Stake in Constellation Oilfield
(Bloomberg) -- BP Plc is weighing a sale of its majority stake in the Constellation oilfield in the Gulf of Mexico, according to people familiar with the matter, as it pushes ahead with a divestment program.The oil exploration and production giant has reached out to potential buyers of the deepwater asset, which could achieve a value of around $200 million in any sale, the people said, asking not to be identified because they aren’t authorized to speak publicly.The field is expected to attract interest from closely held peers and larger corporations, according to the people. A representative for BP declined to comment.A sale would form a small part of BP Chief Executive Officer Bernard Looney’s plan to divest $25 billion in assets by 2025 to cut debt and transform the company into a clean-energy giant. BP is also in discussions about a sale of a roughly 10% stake in a key gas field in Oman, Bloomberg News reported in June. Investors have so far remained skeptical of the plans, with BP’s stock down 58% this year through Wednesday, giving it a market value of 40 billion pounds ($52 billion).The Gulf of Mexico has emerged as a source of stability and a steady source of cash-flow during this year’s oil-price rout, in contrast to the previous six years when the offshore region was overlooked by many companies in favor of shale.BP owns 66.7% of the Constellation field, which produces about 10,000 barrels a day, according to its website. The remainder is held by operator Occidental Petroleum Corp., which inherited it through its $37 billion purchase of Anadarko Petroleum Corp. last year. Occidental has so far held onto the former Anadarko Gulf assets, even as it’s been aggressively trying to sell elsewhere to raise money and pay down debt.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Bloomberg
Cut-Price Deals Show Shale’s Rapid Decline From Debt-Fueled Boom
(Bloomberg) -- There is no more dramatic sign of the U.S. shale industry’s fall from grace than one of the best in the business being sold off for less than a third of its peak value.Concho Resources Inc., an early explorer of the Permian Basin’s once-coveted oil riches that was worth $32 billion just two years ago, is selling for $9.7 billion in stock. ConocoPhillips is paying a meager 15% premium over Concho’s closing price on Oct. 13, the last trading session before Bloomberg News first reported the companies were in talks.Concho is not alone: More than half of the shale deals this year came with a premium of less than 10% over stock prices that had already plunged in the past couple of years, according to data compiled by Bloomberg.Shale explorers have rapidly lost favor with Wall Street after years of high debt, poor shareholder returns and value-destroying deals. The devastating impact of the Covid-19 pandemic on oil demand made matters worse, pushing many into bankruptcy. Private equity firm Kimmeridge Energy is among investors urging the highly fragmented industry to seek low-premium deals, gain scale and cut costs.“To sell out at a 15% premium I think sends the message that it’s going to be a lot harder to be a stand-alone” oil company, Jennifer Rowland, an analyst at Edward Jones, said Monday in a phone interview.In just the last few weeks, Chevron Corp. concluded the purchase of Noble Energy Inc. for a modest 12% premium, while WPX Energy Inc. agreed to merge with Devon Energy Corp. for a benefit of just 4.2% above its pre-deal share price, according to data combined by Bloomberg. Both deals, like Conoco-Concho, were all-stock transactions, meaning there’s no golden parachute for investors.Pioneer Natural Resources Co. is in talks to buy rival U.S. shale driller Parsley Energy Inc. in an all-stock deal that could be finalized by the end of the month, a person familiar with the matter said Monday. Dow Jones earlier reported the talks.The more down-to-earth deals of late are in stark contrast to Occidental Petroleum Corp.’s $37 billion acquisition of Anadarko Petroleum Corp. last year. The purchase raised the ire of billionaire investor Carl Icahn and left Occidental, which is now worth little more than $9 billion, saddled with about $40 billion of debt.“We looked at the way the world was changing and the need for size and scale,” Concho Chief Executive Officer Tim Leach said in an interview. “The fact that this transaction is 100% stock -- on a relative basis all our shareholders are still exposed to all the upside of the combined company.”While executives like Leach point to the value of being able to participate in an oil-price rally with an all-stock deal, it’s also a sign that buyers are not willing to fund purchases with cash, which would often mean taking on debt. And tapping shareholders for funds is out of the question. Energy has slumped to less than 2% of the S&P 500 Index, down from more than 11% a decade ago, even as the wider market rose to record levels.U.S. oil production has tumbled to around 10.5 million barrels a day from a record 13 million earlier this year. That’s the equivalent of removing more than the current production of OPEC member Kuwait.The industry is unlikely to make that back anytime soon, and more declines may be on the way next year. Occidental Petroleum Corp. CEO Vicki Hollub last week said the U.S. may never again reach those record production levels.READ: U.S. Oil Production Has Already Passed Its Peak, Occidental SaysThis is in part due to shale wells’ rapid decline rate -- as much as 70% within the first year -- and the need for new wells, and money to drill them, to offset the production drop-off.“With the underlying decline rate that approaches 40%, it’s hard to distribute cash back to the shareholders as rapidly as we can in this new model,” Concho’s Leach said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Motley Fool
ConocoPhillips Wades Deeper Into Permian With Concho Acquisition
The Permian Basin is about to get a new heavyweight player as the rumors of ConocoPhilips (NYSE: COP) buying Concho Resources (NYSE: CXO) proved true. The deal puts Conoco on a footing with Occidental Petroleum (NYSE: OXY) and Chevron (NYSE: CVX) with some 372,000 barrels of oil equivalent per day (BOE/d) in the Permian.
