The nation’s biggest oil and gas companies could end up even bigger by the end of the coronavirus pandemic. Analysts expect a coming wave of bankruptcies should the price of oil remain low. That could allow the largest petroleum industry players to scoop up more wells on the cheap – and leave them with more reserves after all the market tumult. “The rich are going to get richer,” said John Kilduff, a partner with Again Capital, an oil-trading hedge fund. “The Exxons and Chevrons will pick up more assets.”
Nearly every oil company is hurting due to the pandemic. But the largest are best positioned to emerge stronger from the downturn.
The drop in people driving and flying during the viral outbreak has brought many already struggling oil companies to the brink of going belly up. Small and midsize companies working mainly in the Permian Basin and other shale patches have been hit the hardest by the drop in prices. Getting shale oil out of the ground is generally more costly than tapping for other petroleum. Even before the pandemic, the shale-oil sector saw lending dry up as banks and private investors lost confidence in those companies turning a profit. “They were already in trouble,” Kilduff said.
The oil giants, meanwhile, have wells around the world and the cash on hand to weather the turmoil.
As some small to midsize producers seeking Chapter 11 bankruptcy protection start to liquidate, oil giants may be able to buy their assets at bargain prices.
Already at least one giant, Chevron, says it is keeping an eye out for potential acquisitions. “Certainly there are stresses on the various players in the industry today that could result in commercial opportunities, and we are alert to that,” chief executive Mike Wirth said at the company’s annual shareholders meeting, held virtually due to the pandemic. “If we see something that makes good sense for our shareholders,” he added, “we certainly will consider it.”