The head of top U.S. shale producer Pioneer Natural Resources Co. on Sept. 9 said consolidation among oil and gas producers in the United States will slow in the next two years, particularly as oil majors bow out of the market.
Pioneer was central to a wave of U.S. shale dealmaking, with multibillion-dollar acquisitions of Parsley Energy and DoublePoint Energy. But deal-mania is mostly over because of a lack of cash and worries about future demand, Pioneer CEO Scott Sheffield said in remarks at the Barclays CEO Energy-Power Conference.
Sheffield said Pioneer is “not going to be doing any future M&A activity.” When pressed on the topic, he said there is only one property the company would consider, but it is not for sale.
Energy M&A picked up this year after a slow start, with more than 40 deals valued at $33 billion in the second quarter of 2021, according to consultancy Enverus.
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Sheffield warned that if the oil industry focuses too heavily on ESG issues, it could lead to underinvestment that would drive up energy prices. He predicted Brent crude next year could trade between $65/bbl and $80/bbl.
Deals will slow because the market has not generally rewarded firms embarking on major acquisitions or capital spending increases. Pioneer’s shares fell more than 6% after its $6.4 billion acquisition of DoublePoint.
“Shareholders want consolidation in the industry, but they don't want you to do it,” Sheffield said at the conference.
Pressure from shareholders to focus on increasing payouts and preparing for a lower-carbon energy future is inhibiting deals, Sheffield said.
Oil majors that historically provided an outlet for asset sales do not have enough cash and would likely have to use shares to buy smaller firms, diluting their returns.
Sheffield on Sept. 9 estimated there are only about five companies with enough drilling inventory to last the next 15 to 20 years, and said that those looking to grow would have to acquire reserves.
“You’re not going to find new shale opportunities in the United States,” he said.
He added that Pioneer will likely divest some of its less-productive, or Tier 2, acreage in the Delaware and Midland basins in Texas.
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