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CNOOC's overseas assets have made another big discovery!

2023-11-17 16:39:33

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On October 26, Reuters reported that ExxonMobil and its partners Hess Corporation and CNOOC Limited made a "major discovery" in the Stabroek block offshore Guyana, the Lancetfish-2 well, which is also the fourth discovery in the block in 2023. 

The Lancetfish-2 discovery is located in the Liza production licence area of the Stabroek block and is estimated to have 20m of hydrocarbon-bearing reservoirs and approximately 81m of oil-bearing sandstone, the Guyana's energy department said in a press release. Authorities will conduct a comprehensive assessment of the newly discovered reservoirs. Including this discovery, Guyana has received 46 oil and gas discoveries since 2015, with more than 11 billion barrels of recoverable oil and gas reserves. 

It is worth noting that on October 23, just before the discovery, oil giant Chevron announced that it had reached a definitive agreement with rival Hess to acquire Hess for $53 billion. Including debt, the deal is worth $60 billion, making it the second-largest acquisition after ExxonMobil's $59.5 billion acquisition of Vanguard Natural Resources, which is worth $64.5 billion including net debt, announced on October 11.

Behind the super mergers and acquisitions, on the one hand, the return of international oil prices has brought rich profits to the oil giants, and on the other hand, the oil giants have their own scales for when the demand for oil will peak. Whatever the reason, behind the mergers and acquisitions, we can see that the oil industry is back in the boom of mergers and acquisitions, and the era of oligarchs is approaching!

For ExxonMobil, the acquisition of Pioneer Natural Resources, the highest daily production company in the Permian region, helped establish its dominance in the Permian Basin, and for Chevron, the most striking aspect of the acquisition of Hess was that it was able to take over Hess's assets in Guyana and successfully "get on the bus" to the wealth line. 

Since ExxonMobil made its first major oil discovery in Guyana in 2015, the new oil and gas discoveries in this small South American country have continued to set new records and have been coveted by many investors. There are currently more than 11 billion barrels of recoverable oil and gas reserves in Guyana's Stabroek block. ExxonMobil holds a 45% interest in the block, Hess holds a 30% interest, and CNOOC Limited holds a 25% interest. With this transaction, Chevron pocketed Hess's interest in the block.

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Chevron said in a press release that Guyana's Stabroek block is an "extraordinary asset" with industry-leading cash margins and low carbon profile, and is expected to grow in production over the next decade. The combined company will grow production and free cash flow faster than Chevron's current five-year guidance. Founded in 1933 and headquartered in the United States, Hess is a producer in the Gulf of Mexico of North America and the Bakken region of North Dakota. In addition, it is a natural gas producer and operator in Malaysia and Thailand. In addition to Hess's assets in Guyana, Chevron is also eyeing Hess's 465,000-acre Bakken shale assets to boost Chevron's position in U.S. shale oil and gas. According to the U.S. Energy Information Administration (EIA), the Bakken region is currently the largest producer of natural gas in the United States, producing about 1.01 billion cubic meters per day, and the second-largest oil producer in the United States, producing about 1.27 million barrels per day. In fact, Chevron has been looking to expand its shale assets, initiating mergers and acquisitions. On May 22 this year, Chevron announced that it would acquire shale oil producer PDC Energy for $6.3 billion to expand its oil and gas business in the United States, following rumors that ExxonMobil would acquire Pioneer Natural Resources in April this year. The transaction is valued at $7.6 billion, including debt. 

Going back in time, in 2019, Chevron spent $33 billion to acquire Anadarko to expand its U.S. shale oil and African LNG business territory, but was finally "cut off" by Occidental Petroleum for $38 billion, and then Chevron announced the acquisition of Noble Energy in July 2020, including debt, with a total transaction value of $13 billion, becoming the largest merger and acquisition in the oil and gas industry since the new crown epidemic. 

The "big deal" of spending $53 billion to acquire Hess is undoubtedly an important "fall" of the company's merger and acquisition strategy, and will also intensify the competition between oil giants.

In April this year, when it was reported that ExxonMobil would make a big purchase of Pioneer Natural Resources, the oil circle issued an article pointing out that after ExxonMobil, the next one may be Chevron. Now, "boots have landed", in just one month, the two major international oil giants have officially announced super acquisition transactions. So, who will be next? 

It is worth noting that in 2020, ConocoPhillips acquired Concho Resources for $9.7 billion, followed by ConocoPhillips for $9.5 billion in 2021. ConocoPhillips CEO Ryan Lance has said he expects more shale deals, adding that Permian Basin energy producers "need to consolidate." That prediction has now come true. Now, with ExxonMobil and Chevron making big deals, their peers are also on the move.

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Chesapeake Energy, another major shale giant in the United States, is considering acquiring rival Southwestern Energy, two of the largest shale gas reserves in the Appalachian region of the northeastern United States. A person familiar with the matter, who spoke on condition of anonymity, said that for months, Chesapeake had intermittent discussions with Southwestern Energy about a possible merger. 

On Monday, October 30, Reuters reported that oil giant BP "has been in talks with multiple entities in recent weeks" to form joint ventures in multiple shale blocks in the United States. The joint venture will include its activities in the Haynesville shale gas basin and Eagle Ford. Although BP's interim CEO later dismissed claims that US rivals ExxonMobil and Chevron were involved in big oil deals, who's to say that the news was anything but groundless? After all, with the huge profits of traditional oil and gas resources, the oil majors have changed their positive attitude of "climate resistance" and adopted new measures to seize the huge profit opportunities of the moment. BP will reduce its commitment of 35-40% emissions reduction by 2030 to 20-30%; Shell has announced that it will not further reduce production until 2030, but will instead increase natural gas production. Separately, Shell recently announced that the company will cut 200 positions in its Low Carbon Solutions division by 2024. Competitors such as ExxonMobil and Chevron have deepened their commitment to fossil fuels through major oil acquisitions. What will the other oil giants do?