After the COVID-19 pandemic crushed global fuel demand sending oil prices to historic lows earlier this year, M&A in the oil and gas space largely came to a full stop.
Though, Evercore ISI senior managing director James West said that could soon change.
Already, Chevron Corp. agreed to a buyout of Houston-based independent E&P company Noble Energy Inc. on July 20 in what is the biggest oil deal since the price crash. The all-stock transaction is valued at $5 billion.
In a discussion with Hart Energy’s Jessica Morales and Emily Patsy, West said although investment banking advisory firm Evercore expects to see more deals like Chevron’s buyout of Noble Energy, he believes most buyers will likely hold out for more restructurings to takes place.
“There will be restructurings first most likely,” he said. “So, companies that can survive who have too much debt will go in and delever, then likely be bought either during the bankruptcy process when the leverage is gone or be bought after the bankruptcy process.”
Founded more than 85 years ago, Noble Energy today operates a portfolio of U.S. shale assets, including in the prolific Permian Basin where Chevron already holds a legacy position. However, West noted Noble Energy’s international assets, particularly in the Eastern Mediterranean Sea, most likely played a key role in the deal.
“I think what they were really after here was probably the world-class gas assets of the Eastern Mediterranean,” he said. “That gives them a foothold in that market [and] that gives them more gas exposure. Gas, as we all know and understand I think, is the transition fuel for the energy transition.”
Founded in 1995, Evercore is headquartered in New York and maintains offices and affiliate offices in major financial centers in North America, Europe, the Middle East and Asia. West is responsible for the firm’s research coverage of the oil services, equipment and drilling industry consisting of detailed fundamental research on over 60 companies.
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- U.S. shale consolidation (0:15)
- Chevron’s Noble Energy deal (1:15)
- Tight oil investments (1:54)
- Return to growth mode? (3:07)
- Beyond U.S. shale (4:18)
- Noble Energy’s international assets (5:25)
- OFS companies recovery (6:43)
- U.S. land market/path forward (8:41)