Analysis-Cash-rich Exxon, Chevron use stock for mega deals amid energy market jitters
By David French
(Reuters) — Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) are flush with cash yet their acquisition targets are taking stock as the only form of payment, an arrangement that allows the two largest U.S. energy companies to clinch transformative deals despite volatile oil and gas prices.
Chevron said on Monday it would acquire Hess (NYSE:HES) in a $53 billion all-stock deal, less than two weeks after Exxon said it would buy Pioneer Natural Resources (NYSE:PXD) for $59.5 billion in stock.
The moves followed similar, smaller all-stock deals in the last three years, including Exxon's $4.9 billion agreement to buy Denbury and Chevron's acquisition of PDC Energy (NASDAQ:PDCE) and Noble Energy (NASDAQ:NBL) for $6.3 billion and $5 billion, respectively.
People involved in the negotiations of these deals, as well as analysts and executives in the sector, said that using stock as currency helped reconcile price disagreements with acquisition targets in a volatile energy market.
Geopolitical turmoil, from Russia's war in Ukraine to conflict in the Middle East, has kept energy prices choppy for most of the past two years. U.S. oil futures are up about 7% so far this year after gaining a similar amount in 2022, while U.S. gas futures have plunged about 35% after rising about 20% last year.
The CEOs of the acquired companies, some of whom were founders and attached to them, were reluctant to agree to cash deals that would crystallize a price they may end up regretting should energy prices move up, these people said.
By selling for stock, an acquired company's shareholders can participate in the upside of the combined company. They can also defer taxes by holding on to their new shares rather than cashing out.
CEO
Read more on investing.com
