Time for a consolidation in the oil shale industry
Whiting Petroleum Corp, Oasis Petroleum, Apache Corp, EnCana, Devon Energy Corp, Anadarko Petroleum Corp. are only a few of the big names of shale oil sector in north America. These are some of the names that have given a boost to the fall of the price of oil.
Only in America there are 75 shale-focused companies with different sizes. What is going to happen with all these companies if the oil stays at this level? Many of them have big debts and have also big problems on paying the debts because the initial projections have been made with a 100 Usd oil price. Now many of these companies are under the eye of the majors.
Exxon Mobil and Chevron most likely are going to buy some of them. The problem with these companies is also that their valuation is made by using the oil reserves. As the price of oil has dropped the valuation will be less interesting from what the owners would like. This is a golden moment for the majors to enlarge their reserves with a cheap price.
Now it remains to see if it will be a consolidation between peers or these small medium and large companies will finish in the belly of the largest and oldest oil companies. We know that the crises are made for the strongest. So if these companies come out from the hell they will be stronger in the future.
The only thing we wait to know is the way these companies will escape from the death. Many analysts suggest that one of the ways to consolidate the sector would be a “stock for stock” because of the financing lack and the amount of the debt these companies already have. Otherwise the major part of them will be incorporated by one of the big fish of this market.