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Exxon and Chevron Opened the Floodgates for Oil Megadeals, and Another One Looks to be in the Pipeline

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Andrew R. Michaud

• February 12, 2024

Diamondback Energy and Endeavor Energy Resources are closing in on a merger that could result in the creation of an oil-and-gas giant worth over $50 billion.

A Potential $25 Billion Deal

According to The Wall Street Journal, the stock-and-cash deal would value privately held Endeavor at approximately $25 billion. This merger would establish a leading player in Texas' Permian basin, with Diamondback shareholders expected to own the majority of the combined company. The report suggests that the announcement of the deal might come as early as Monday. Diamondback's stock experienced a slight 1% increase ahead of the news. However, both Diamondback and Endeavor have yet to comment on the situation.

A Megadeal Trend in the Oil-and-Gas Industry

Following in the footsteps of Exxon and Chevron, who made significant acquisitions at the end of last year, this potential merger between Diamondback and Endeavor indicates a continued trend of consolidation in the oil-and-gas sector. In October, Exxon agreed to acquire Pioneer Natural Resources in a deal valued at around $60 billion. Just weeks later, Chevron announced its own acquisition worth a similar amount. In December, Occidental Petroleum entered a $12 billion deal to acquire private shale producer CrownRock.

Consolidation Fueled by Favorable Oil Prices

Higher oil prices have created an opportune environment for these megadeals. With prices neither too high nor too low, negotiations for such deals become more achievable. The Permian Basin, renowned for its prime land, has become increasingly sought-after amidst escalating tensions in the Middle East. Concerns over a potential conflict disrupting oil supplies in the region only add to its allure.

Competing against Industry Rivals

In their pursuit of this merger, Diamondback faced tough competition from other industry rivals, such as ConocoPhillips. Despite the challenges, Diamondback, with a market capitalization of $27 billion, managed to emerge as a frontrunner for the deal.

The Deal Boom Continues

The oil and gas industry's recent string of megadeals may not be coming to an end just yet. As companies recognize the advantages of consolidation and the favorable market conditions, there is potential for more significant transactions.