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M&A has been a major trend in oil and gas in recent months, including more than $190B worth of deals signed in 2023, but the theme is getting complicated as questions swirl over several pending deals, particularly Chevron's (CVX) $53B proposal to acquire Hess (HES).
Hess signaled this week for the first time that the Chevron (CVX) deal could be delayed, after Exxon Mobil (XOM) filed for arbitration to preserve its rights to the massive oil discovery offshore Guyana - the world's fastest growing major crude development and the crown jewel of Chevron's push to buy Hess.
Such arbitration proceedings typically take 5-6 months, Exxon (XOM) Senior VP Neil Chapman said at a Morgan Stanley conference this week.
If Exxon's (XOM) challenge blocks the merger, it would mark the second time a major deal slipped through Chevron (CVX) CEO Mike Wirth's fingers, after his $33B offer for Anadarko in 2019 was foiled by a higher bid from Occidental Petroleum.
Wirth won a $1B breakup fee in the Anadarko loss, but if Chevron (CVX) winds up dropping the Hess (HES) deal, Hess potentially could be off the hook for a $1.7B breakup fee.
Analysts say the deal could go either way, Reuters reported in an analysis.
"It is still very possible" that Exxon (XOM) sees the need to bid for Hess (HES) before a Chevron-Hess shareholder vote, which could happen in the next couple of months, MKP Advisors CEO Mark Kelly told Reuters.
Another possibility is that Chevron (CVX) is forced to pay Exxon (XOM) to allow the deal to proceed, analyst Paul Sankey of Sankey Research said.
Front-month Nymex crude (CL1:COM) for April delivery fell 1.2% on Friday and -2.4% for the week to $78.01/bbl, its lowest since February 26, and front-month May Brent crude (CO1:COM) closed down 1% on Friday and -1.7% for the week to $82.08/bbl.
Also, front-month April Nymex natural gas (NG1:COM) lost 0.7% on Friday and 1.6% this week to $1.805/MMBtu.
ETFs: (USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
Crude oil has traded in a tight band this year, and this week's volatility in Brent prices was the narrowest since September 2021, according to Bloomberg.
Cutbacks by OPEC+ and rising Middle East tensions have been balanced by surging supply from producers outside the cartel, with ongoing concerns about China's demand growth adding to headwinds.
U.S. production is strong, "which is giving traders pause on just how bullish things can get despite the OPEC+ cuts and the potential for both Iranian and Venezuelan barrels to flow in the near future," Tradition Energy's Gary Cunningham said.
The oil and gas stock sector, as represented by the Energy Select Sector SPDR ETF (NYSEARCA:XLE), ended the week +1.1%.
Top 10 gainers in energy and natural resources in the past 5 days: Nuscale Power (SMR) +59.1%, Navios Maritime Partners (NMM) +28.9%, MGE Energy (MGEE) +28%, Perpetua Resources (PPTA) +24.5%, TPI Composites (TPIC) +23%, Harmony Gold Mining (HMY) +20.2%, Gatos Silver (GATO) +20.1%, McEwen Mining (MUX) +18.5%, Seabridge Gold (SA) +15.8%, Coeur Mining (CDE) +15.5%.
Top 5 decliners in energy and natural resources in the past 5 days: Brenmiller Energy (BNRG) -18.6%, Albemarle (ALB) -17.1%, Amplify Energy (AMPY) -15.8%, American Battery Technology (ABAT) -15.5%, Sigma Lithium (SGML) -15.2%.
Source: Barchart.com