European and American oil companies are taking very different approaches to the future of energy.
ConocoPhillips (ticker: COP) has made one of the largest deals in energy in the past year, agreeing to buy Royal Dutch Shell
‘s (RDS.B) assets in the Permian Basin for $9.5 billion in cash.
Conoco is obtaining roughly 225,000 acres and producing properties in Texas and more than 600 miles of operated crude oil, gas, and water pipelines and infrastructure.
“We were presented with a unique opportunity to add premium assets at a value that meets our strict cost of supply framework and brings financial and operational metrics that are highly accretive to our multi-year plan,” Ryan Lance, Conoco’s CEO, said in a statement.
Conoco shares were up 1.6% in premarket trading Tuesday after being down less than 1% after hours Monday, while Shell shares were up 4.7%. Conoco also announced that it was increasing its quarterly dividend 7%, to 46 cents a share, representing a current dividend yield of 3%.
So even as Europe shrinks its footprint in the U.S. and elsewhere, American companies continue to see considerable room to grow. Another recent example is Laredo Petroleum (LPI), which announced on Sunday that it had agreed to buy more acreage in Texas.
Both U.S. and European oil majors are under pressure to shift their businesses to low-carbon alternatives. But European companies are transitioning much faster, jettisoning fossil fuel assets and making large bets on renewable energy. A Dutch court told Shell earlier this year that it needed to cut the emissions produced by its products faster than it had initially anticipated.
In the U.S., oil-and-gas companies have begun talking more about climate change, and some are investing in new technologies. Chevron (CVX), for instance, announced plans last week to invest $10 billion in areas like renewable fuels by 2028. But most big oil companies are not considering the kinds of wholesale changes that are taking place across the Atlantic. In the U.S., investors in oil will still mostly be getting oil exposure. In Europe, companies like BP (BP), TotalEnergies (TTE), and Shell are becoming energy transition plays — a way to buy into solar and wind power while making a diminishing amount of money off fossil fuels.
Truist analyst Neal Dingmann had mentioned in a report on Monday that Shell could sell its stake in the Permian, and that Conoco might be a company looking to make deals. Other companies he mentioned included Devon Energy (DVN), Earthstone Energy (ESTE), Marathon Oil (MRO), Northern Oil & Gas (NOG), SilverBow Resources (SBOW), Southwestern Energy (SWN), and Whiting Petroleum (WLL).
Write to Avi Salzman at [email protected]
