Is a buyout gusher coming in the Permian Basin? Why a takeover boom looms

Consolidation in the oil fields threatens to further slow production growth from the Permian. Companies are looking to buy up rivals to secure drilling sites for the future — not to boost their output immediately. They often cut back on drilling rigs when they close deals, which slows production growth and could put upward pressure on oil prices.

An Exxon-Pioneer deal would be the largest corporate energy transaction since Shell Plc’s blockbuster takeover of BG Group in 2015, according to Rystad Energy.Diamondback Energy Inc. is working with a financial adviser to sell non-core assets in the western Permian Basin, Bloomberg News reported.

OPEC+’s recent surprise cut and continued expectation of demand outpacing supply is setting a floor for crude prices, which makes it easier to ink oil deals, said Muhammad Laghari, senior managing director at Guggenheim Securities. Another ripe target: closely held Endeavor Energy Resources, which has a massive position in the Permian and has drawn interest in the past from Exxon, Chevron Corp. and ConocoPhillips.

To be sure, there are several factors that could challenge deals, from social issues to heightened regulatory scrutiny. The industry also made record profits last year and largely eliminated debt, meaning executives are in no mood to sell cheaply.

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