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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 25, 2020 - Energy & Environment

Oil prices may be breaking free of tractor beam

Illustration: Rebecca Zisser/Axios

Crude oil is trading at its highest levels in eight months and prices may be poised to escape the rather narrow band where they've been stuck since June after coming back from their spring depths.

Why it matters: The gains this week don't just matter for the beleaguered industry's future — they're a sign that traders see the promise of COVID-19 vaccines allowing life to begin returning to the before times.

SEC proposes rules for giving gig workers equity

Illustration: Sarah Grillo/Axios

The U.S. Securities and Exchange Commission has proposed rule changes that would make it possible for gig companies to give equity to their workers as part of their compensation if they meet certain requirements.

Why it matters: This is something gig companies including Uber and Airbnb have asked the SEC to do over the years as a way to share their companies' upside with these non-employees.

Tony Hsieh, longtime Zappos CEO, dies at 46

Tony Hsieh. Photo: FilmMagic/FilmMagic

Tony Hsieh, the longtime ex-chief executive of Zappos, died on Friday after being injured in a house fire, his lawyer told the Las Vegas Review-Journal. He was 46.

The big picture: Hsieh was known for his unique approach to management, and following the 2008 recession his ongoing investment and efforts to revitalize the downtown Las Vegas area.