Acquisitions go up or down in this industry depending on several factors. Companies that made record profits in 2022 have more cash to throw around. Many also expect oil prices to stay relatively low for the foreseeable future. In that context, big companies—oil “majors” like ExxonMobil or Chevron—have a lot to gain from buying up more production capacity so that they can operate more efficiently than smaller competitors, by reducing the amount spent to make every barrel. One respondent warned those companies are making bets on a future that won’t happen, nodding toward feared declines in shale production:
Majors are explicitly investing on the thesis that the back end of the forward curve for oil is just plain wrong. Whatever Excel model they are using to justify these prices isn’t going to align with their consolidate-and-cut operations. Inventory for U.S. onshore will be extremely valuable in five years as shale inches toward death and moves to terminal decline. Prices are likely closer to $150 than $50 at the end of the decade. The young folks in energy need to learn offshore and international exploration quickly. [My emphasis added.]
Companies’ climate and sustainability goals also tend to depend on their size. While 53 percent of the large firms reported that they plan to reduce carbon emissions, just 18 percent of small firms intend to do the same. Similarly, 68 percent of bigger drillers plan on reducing methane emissions, compared to 34 percent of smaller ones. Fifty-one percent of those smaller companies intend to undertake none of the sustainability measures the Dallas Federal Reserve asked about, in contrast to the 11 percent of respondents from large firms. Very few companies in either category—just 6 percent of drillers—plan to invest in renewables.
Under the shield of anonymity, most concerns executives voiced had little to do with the alleged “woke liberal” war on oil that Republicans keep banging on about. Mounting supply chain costs are a major concern, as is the Organization of Petroleum Exporting Countries’ ability to keep prices elevated—a key priority for an industry that needs higher prices to break even on unconventional extraction methods like fracking.