U.S. oil and gas companies are facing a daunting challenge as they seek to sell around $27 billion worth of assets to fund investor payouts in the coming years. This comes as the biggest wave of energy megamergers in 25 years nears the end of regulatory reviews.
The share buybacks and dividends are aimed at luring investors back to an industry that has fallen out of favor due to volatile returns and pressure to decarbonize portfolios. Energy stocks now represent just 4.1% by weight of the S&P 500, a third of their 2011 share as tech and healthcare investments took off.
However, finding new owners for these properties is unlikely to be a quick or easy process, according to bankers and analysts. There are fewer institutional and European oil buyers interested, and a lack of ready cash to finance these deals. The private equity firms that once bought Big Oil’s cast-offs have turned their attention to energy transition, social impact, and renewable investments.
The scale of recent mergers has been unprecedented, with $180 billion from six deals since October. Driven by a rush to add oil reserves that can be tapped in the future, most of these deals are expected to wrap up this year and will unleash a flood of oil wells, pipelines, offshore fields, and infrastructure packages onto the market. The lack of ready buyers suggests that these sales will take time and may turn into asset swaps rather than cash sales.
Three major acquirers – Chevron, ConocoPhillips, and Occidental Petroleum – have pledged to raise between $16 billion and $23 billion combined from post-closing sales. ExxonMobil, the top dealmaker, has not disclosed a divestiture target, but has raised $4 billion per year in sale proceeds since 2021.
In addition to fewer private-equity and international buyers, more intensive regulatory reviews have slowed the marketing kickoff. Some investment bankers believe the divestitures could run well into next year, indicating a challenging road ahead for energy majors seeking to offload their assets.