In March 2020, the collapse of the OPEC-plus coalition, the initiation of COVID-19 lockdowns, and other factors pushed the U.S. E&P sector to the brink of insolvency. Crude oil prices had crashed to $20/bbl — one-third their level at the start of that fateful year — and producers had shifted to survival mode, slashing capex, cancelling infrastructure projects, and eyeing new, more dire worst-case scenarios. Who would have thought that only 22 months later E&Ps would be winning back investors and enjoying sky-high share prices? Of course, the recovery in commodity prices played a major role in this reversal. But another driver has been an unexpected wave of corporate consolidation that has allowed many E&Ps to boost their inventories of high-margin assets, accelerate free cash flow generation, and grow shareholder returns while slashing capital and corporate expenditures. In today’s RBN blog, we examine the forces behind — and the implications of — the most important surge of corporate upstream deals in two decades.
Buy, Buy, Buy – Upstream Consolidation Surges on Drive to Maximize Cash Flow
