When Occidental and Chevron started the bidding war to buy Anadarko this spring, analysts predicted that it was the beginning of a wave of consolidation in the largest U.S. shale basin, the Permian.
The true consolidation has yet to come, but since this spring, conditions have become more advantageous for Big Oil to take over smaller players in the basin in order to grow their position and production even more.
Despite OPEC’s efforts to prop up the price of oil and despite U.S. sanctions taking more than 2 million barrels of oil per day off the market from Iran and Venezuela, WTI Crude prices have lingered range-bound in the $50s, capped by the very same production growth in the Permian and intensified fears of a slowdown in global oil demand growth.
While U.S. shale production is booming and the Permian continues to set new production records, the pace of growth is slowing as many companies have recently scaled back production growth targets while investors and bankers remain skeptical about the shale industry’s returns.
The oil price slump in the fourth quarter of 2018 and the investors’ now finite patience with shale producers not turning in cash flows have combined to punish the stocks of many big and small U.S. oil drillers in recent months.