Exxon Mobil and Chevron’s Acquisition Plans Shift Focus Away from European Majors
The possibility of Exxon Mobil or Chevron buying European majors like BP and Shell has diminished, according to investors. Speculation about such acquisitions had been fueled by the underperformance of European companies compared to their American counterparts. However, Chevron and Exxon recently announced significant acquisitions in the Americas, redirecting their attention away from European targets.
European Majors’ Pivot to Renewables Dampens Acquisition Prospects
Investors have punished European majors for their emphasis on renewables and low carbon energy, while rewarding U.S. companies for their focus on oil and gas production. This divergence in strategies has made the prospect of a major acquisition by Chevron or Exxon highly unlikely.
Prior Consolidation in the Oil Industry
In the late 1990s, Exxon, Shell, BP, and TotalEnergies merged with rivals to create integrated companies amidst a collapse in oil prices. However, the current landscape is different, with major players sitting on large cash reserves due to record-high profits.
Focus on Production and Shareholder Rewards
Rather than investing in exploration and development, Exxon and Chevron have chosen to increase production through acquisitions. Their focus on financial discipline and rewarding shareholders has guided their recent moves.
Recent Acquisitions by Exxon and Chevron
Exxon, the largest U.S. oil producer, announced its agreement to acquire Pioneer Natural Resources, a deal valued at $59.5 billion. This acquisition would make Exxon the biggest producer in the largest U.S. oilfield, ensuring a decade of low-cost production. Chevron, on the other hand, revealed its plan to acquire U.S. rival producer Hess for $53 billion.
Unlikelihood of U.S. Purchase of European Rivals
Industry insiders, analysts, and investors agree that a major acquisition like Chevron buying BP is unlikely. The Hess acquisition will keep Chevron occupied for several years, while Exxon is in a similar position following its deal with Pioneer.
Complexities and Regulatory Challenges
A potential combination of Chevron or Exxon with BP or Shell would be complex from both regulatory and anti-trust perspectives. Additionally, the renewables operations of the European majors may not align with the strategies of U.S. companies.
The European Union has been pushing oil and gas companies harder than the U.S. government to shift towards alternative business models and embrace the energy transition. Some European investors have also advocated for energy companies to address climate change. However, others seeking short-term returns have urged a renewed focus on oil and gas, leading to adjustments in transition targets by Shell and BP.