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Illustration: Sarah Grillo/Axios

Private equity is watching the consolidation of the North American oil and gas sector from the sidelines, instead focusing its energy efforts on renewables.

Driving the news: Cenovus Energy on Sunday agreed to buy Husky Energy for $2.9 billion in stock, in a deal that would create Canada’s third-largest oil and gas producer.

  • Last week, ConocoPhillips agreed to pay $9.7 billion for Concho Resources, and Pioneer Natural Resources signed a $4.5 billion deal for Parsley Energy.
  • In each case, the purchase price was well below what the target companies were worth pre-pandemic, due to the vicious confluence of oversupply and demand destruction. The basic idea is that consolidation could pull costs out of the system, thus letting companies maybe eke out a profit at $40 per barrel prices.

Private equity helped drive the shale boom, buying up acreage and expanding oilfield services companies. But most of that activity has dried up, with new oil and gas investments focused more on propping up existing deals than on expanding production.

  • "Everyone is getting into renewables," a top energy private equity investor tells me. "It's just a smarter long-term play, particularly as the macro economics of fossil fuels get worse and the macro economics of renewables get better."
  • "Some areas have become too crowded, like newly built, operating renewables assets, but overall there's plenty of opportunity," says a veteran renewables backer. "Beyond the pandemic, it's that wind and solar have become much more cost efficient — or even cost competitive in some places — at the same time that coal and nuclear plans in the U.S. are being decommissioned."

The election is also being closely watched, with private equity believing that a President Biden could usher in a new era of renewable energy subsidies. Plus his pledge to ban fracking on public lands.

  • But, but, but: Investors caution that it can take a while for campaign rhetoric to be translated into signed legislation; possibly longer than their anticipated holding periods.

The bottom line: Private equity is exiting fracking just as quickly as it entered.

Go deeper

Ben Geman, author of Generate
Nov 16, 2020 - Energy & Environment

OPEC+ discussions happening ahead of pivotal meetings

Illustration: Rebecca Zisser/Axios

OPEC+ committees are holding talks today and tomorrow ahead of pivotal meetings in two weeks that will decide the next steps in the group's production-limiting agreement.

Why it matters: The OPEC+ group — led by Saudi Arabia and Russia — could send more signals that they'll delay plans to lower the amount of joint production cuts in order to avoid undercutting the limited and fragile price recovery.

Dan Primack, author of Pro Rata
2 hours ago - Economy & Business

New deals in the COVID economy

Illustration: Sarah Grillo/Axios

COVID-19 is the macro horror of our lifetimes, and has destroyed or severely damaged countless businesses. But, like with most horribles, it also has created some opportunities.

Driving the news: Merck this morning announced an agreement to buy OncoImmune, a Maryland-based biotech that showed promising late-stage clinical results for a therapy that treats severe and critical coronavirus cases.

3 hours ago - Technology

Biden's openings for tech progress

Photo illustration: Eniola Odetunde/Axios. Photo: Win McNamee/Getty Images 

Item No. 1 on President-elect Joe Biden's day-one tech agenda, controlling the flood of misinformation online, offers no fast fixes — but other tech issues facing the new administration hold out opportunities for quick action and concrete progress.

What to watch: Closing the digital divide will be a high priority, as the pandemic has exposed how many Americans still lack reliable in-home internet connections and the devices needed to work and learn remotely.