Dec 12, 2023 - Business

Shale oil deals are defying the M&A slump

Animated illustration of two pools of oil merging to form a dollar sign.

Illustration: Brendan Lynch/Axios

U.S. shale oil deals are booming, in defiance of the broader M&A slowdown and talk about an energy transition.

Driving the news: Occidental Petroleum yesterday said it would pay around $12 billion to buy CrownRock, an energy producer focused on the Permian Basin in West Texas.

  • The primary seller is Lime Rock Partners, one of several private equity firms now cashing in on prescient acreage bets from more than a decade ago.
  • It's also expected to spark additional M&A, as Oxy likely will divest other assets to finance the purchase.

The big picture: The Permian Basin alone has been the focus of more than two dozen deals so far in 2023, representing a record $100 billion+ in value.

  • And that doesn't even include other shale-focused deals like Chevron paying $7.6 billion for PDC Energy.

Behind the scenes: This is literally a land grab.

  • Big Oil is rushing to secure a limited supply of high-quality acreage, much of which already has existing infrastructure.
  • Or, as Wood Mackenzie analyst Rob Clarke puts it: "Scarcity drives action."

Zoom out: It's also what Axios' Ben Geman calls a "both/and" approach, as companies like Oxy have spent big money in climate tech areas like carbon dioxide removal.

The bottom line: The Permian Basin may not host another $100 billion of deals next year, but there's plenty more shale M&A to come.

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