U.S. based shale producer Devon Energy Corp is reportedly in discussions to purchase its rival, WPX Energy Inc. People familiar with matter claim that the buyout may be in the form of an all-stock transaction which would lead to the creation of a company that would be valued at around USD 6 billion. Reliable sources state that the deal is likely to be announced officially, as early as next week. The transaction may value the Tulsa-based company at a small premium to its present share price. However, the anonymous sources have also reported that although the talks are strongly in place, an agreement is not guaranteed to be in the works. As per sources familiar with the nitty-gritties of the present situation, the deal is an example of an increase in consolidation in the oil and gas industry. This can be attributed to the fact that low energy prices have pushed certain independent producers to achieve scale through mergers. For instance, in July, Chevron Corp put forth an acquisition deal for Noble Energy Inc. for USD 5 billion in stock. Pertaining to the intense lockdown measures due to COVID-19, the demand for hydrocarbons has substantially reduced. This has inadvertently had a negative impact on the crude prices in the U.S. (incidentally for the first time early this year), on account of which O&G producers in the United States have been seeking out combinations. Not to mention, these mergers also enable firms to eradicate duplication and create economies of scale, and structure them at a small premium or none to current valuations so as to retain maximum cash. Neither WPX nor Devon have responded to any requests for comments. As per sources, the Oklahoma City-based Devon had been valued at USD 3.4 billion at the end of Friday. The same day recorded the closure of WPX shares at USD 4.44, thereby giving the firm a market capitalization of USD 2.5 billion. Source Credits: https://www.foxbusiness.com/markets/us-shale-producer-devon-in-talks-to-acquire-peer-wpx-sources
Shale producer Devon apparently plans to buy out WPX Energy Inc.
September 28, 2020
Energy & Power