Financial Energy Review
Oil majors offshore Nigera are now considering taking decisions and steps unmarginable to break even in the face of the after effects of the pandemic which include mergers.
For many companies in Nigeria, a merger could be the only way to survive as oil prices appear to be stuck at $40 a barrel: lower than the majority of the oil companies need to break even, let alone turn in a profit.
Already in the United States two major oil firms Devon Energy and WPX Energy are discussing a merger to weather the impact of the pandemic on the oil industry.
Industry source said an agreement on the deal could be reached very early with the value of the new entity at some $6 billion based on the two companies’ market caps. The merger will be an all-stock deal, the WSJ sources said.
Both companies have suffered hefty losses in their market valuation recently, with Devon’s share price shedding 64 percent over the past 12 months and WPX Energy losing 57 percent of its value.
The deal, if it goes through, could be a sign of further consolidation down the road. While big energy players are well placed to withstand any crisis even if they have to slash spending and cut jobs, mid-sized independents are much more vulnerable. This is especially true where heavily indebted producers are dealing with the twin pressure of the demand-destructive pandemic and shareholders breathing down their necks for higher returns.
