Shale oil producers Oasis Petroleum and Whiting Petroleum are close to a deal to merge their operations, the Wall Street Journal reports, citing people close to the talks.
If the talks end in an agreement, the deal — for all shares — could be announced as early as this week, sources say. The value of the combined company could reach $6 billion.
The U.S. shale oil industry has seen a wave of major M&A deals amid the pandemic, and analysts expect the consolidation trend to continue this year.
E&P M&A flow could reach its highest level in 2022 if commodity prices remain stable, WoodMac analysts said in their 2022 outlook released in January.
“The ability of companies to finance and make acquisitions improved immeasurably during 2021 – we can clearly see this in the increase in large cash transactions. If commodity prices remain elevated, the possibility of deals will only increase until 2022,” the authors of the forecast note.
Last month, GlobalData reported that there were 74 oil and gas deals worth $1 billion or more in 2021. The majority of M&A deals were in the exploration and production segment, with transactions totaling $120 billion last year. Analysts at GlobalData noted that shale production was one of the driving forces behind this wave of consolidation, adding that the Permian fields were the focus of deal participants.
Right now, shale stocks are rising in line with international oil prices, and both Oasis and Whiting have benefited from the rally, especially as they have already begun streamlining their operations in response to the pressures of the pandemic.
The WSJ recalls that both companies had to file for Chapter 11 bankruptcy protection when oil prices plunged in the early days of the pandemic, resulting in an unprecedented decline in demand.
Charles Kennedy for Oilprice.com
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