Scott Sheffield, CEO of Pioneer Resources, said on Tuesday that a small amount of American oil producers would be worth investing in over the next few years.
Sheffield said he expected his company to be one of the winners.
EOG and Pioneer and maybe Hayes long term, ”he said on a conference call announcing Pioneer’s decision to buy
(PXD) defended the deal as a way to increase its scale and cut costs, becoming more efficient in the process. Over the years, investors have complained that oil-and-gas producers have spent very freely on low-return projects, loading up with debt and hurting their shareholders.
In the last few days, manufacturers have announced three deals, which will help them achieve scale. Off the Pioneer Deal,
(DVN) announced plans to merge with
(COP) said on Monday it would buy
(CXO) for $ 9.7 billion.
“I think at the end of the day, some investables are going to be independent,” Sheffield said. “You have grown to over $ 10 billion market cap.”
Investors do not yet seem to have to do with Sheffield’s thesis that large manufacturers are now worth buying which they are consolidating. Pioneer shares have fallen more than competitors since the announcement of the deal, despite paying a nominal premium for Pioneer.
About 100 are independently publicly traded as North American explorers and producers, and some of them had market caps of more than $ 10 billion at the start of the year. One of the most notable names that was excluded from Sheffield’s list
(FANG), is a Texas-based manufacturer down 70% this year and under $ 5 billion. Some analysts suspect that it will be involved in a deal. Diamondback is not back Baron’s Request for comment.
“The Diamondbacks are the only mid-large-cap net play remaining for the Permian operator,” wrote Biju Perincheril, analyst at Susekhana Financial Group, adding the pool of potential buyers is very limited at this point and it was difficult to see beyond Exxon Mobil ( XOM), because Conocophyllips and
“Probably on edge for the time after his recent acquisitions.”
Other oil producers may also be left behind. Sankey Research analyst Paul Sankey called Sheffield’s comments “a clear zinger”
(MUR), no problem
(OXY). “Sankey said he believes those companies are” arguably one-sided until oil can run out to $ 50 a barrel. “
Chris Duncan, a research analyst who covers oil and gas for value manager Brand Investment Partners, which has $ 18 billion in assets under management, said he agrees that maybe only three or four There are oil-and-gas producers that may underperform the price level. He also agrees that consolidation is needed. But Duncan still thinks American manufacturers are too expensive across the board, even though most have fallen more than 50% this year.
“We’ve doubted Shell’s economics for a while,” he said. “Economics has been very bad even at $ 70 oil.”
He is more positive on European integrated oil companies and global oil service players, whose valuations are now so cheap that they find investors more attractive. Duncan declined the name of his favorite, but European Unified includes
Royal Dutch Shell
Write Avi Salzman at [email protected]