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Consolidation battle is forcing shrinking number of oil companies to look further afield for new prospects

Dealmaking in US oil and gas has surged to almost $200bn in the past year as the biggest producers compete to swallow up rivals in a race for scale that has redrawn the national energy landscape.

But as the country’s best drilling acreage is snapped up, companies are casting a wider net and looking beyond the most sought after oilfields for acquisitions that will bolster their ability to pump hydrocarbons in the years ahead.

“We are in the midst of a consolidation wave and I don’t think it is over yet,” said Jon Hughes, chief executive of Petrie Partners, a boutique investment banking firm which advised on Pioneer Natural Resources’ $60bn sale to ExxonMobil.

“We’ve gone from about 65 to 41 publicly traded oil and gas companies in the US in less than five years.”

Since last July companies including Exxon, Chevron and Occidental Petroleum have announced $194bn worth of deals across the US shale patch, according to consultancy Rystad Energy. This is almost triple the amount in the previous 12-month period. The latest came this week when ConocoPhillips announced a $22.5bn acquisition of Marathon Oil, after talks between the companies were reported by Financial Times.

At least another $62bn of assets are known to be on the market, according to Rystad.

Companies including Permian Resources, Matador Resources, Chord Energy and Civitas Resources are in the sights of bigger players, said Michael Alfaro of Gallo Partners, a hedge fund focusing on industrials and energy. He also pointed to privately held companies including Double Eagle and Mewbourne Oil as attractive prospects.

Houston-based EOG, valued at $70bn and Oklahoma-based Devon Energy, valued at $30bn, are the biggest publicly listed US players yet to strike in the recent wave. Devon risks becoming a target for other players if it fails to bulk up, analysts said. The company had held talks with Marathon, but was beaten to the punch by Conoco, said people familiar with the deal.

EOG and Devon did not respond to requests for comment on their plans.

The dealmaking burst has entered a new phase. With much of the best acreage spoken for in the prolific Permian Basin of Texas and New Mexico — the engine room of the country’s oil industry — companies are looking further afield. Consolidation has left almost two-thirds of the field’s shale oil in the hands of just six companies, Rystad estimated.

Conoco’s deal for Marathon signalled a strategic shift in the M&A wave. Marathon holds some Permian acreage but its assets are also scattered across less well-known basins such as Texas’s Eagle Ford, North Dakota’s Bakken and Oklahoma’s Scoop Stack. The deal was struck after Conoco lost out to rival Diamondback Energy in its attempt to buy Endeavor Energy Resources, one of the prized targets in the Permian.

“With limited remaining opportunities in the Permian, increased competition could have pushed ConocoPhillips to look for sizeable options elsewhere,” said Palash Ravi, senior analyst at Rystad. “Consolidation in the US shale is most likely to shift outside of the Permian.”

The recent dealmaking flurry began with Exxon’s $60bn bid for Pioneer, the biggest oil producer in Texas, last October. That was quickly followed by Chevron, Exxon’s biggest rival, announcing a contentious $53bn deal for Hess.

Others soon followed as the biggest oil companies competed to acquire smaller rivals: Occidental Petroleum beat Diamondback to a $12bn deal for CrownRock. Diamondback later muscled out Conoco with its $26bn deal for Endeavor. Conoco’s $22bn acquisition of Marathon on Wednesday came after weeks of vying with Devon Energy. 

Tensions have bubbled out into the open, with Exxon and Chevron sparring over the latter’s acquisition of Hess. Exxon argues it has a right of first refusal over any sale of Hess’s stake in a lucrative project off the coast of Guyana and has filed an arbitration case that could sink the biggest deal in Chevron’s history.

The dealmaking binge has also attracted the attention of antitrust regulators. The Federal Trade Commission has not yet sought to block a deal but it has launched investigations into many of the biggest acquisitions.

Under Lina Khan, FTC chair, six out of eight oil and gas deals announced with price tags over $5bn have received second requests for information from the regulator, according to Petrie Partners. That is up from one in 27 over a period of almost two decades previously.

Of the investigations launched, the regulator has cleared one deal: Exxon’s $60bn takeover of Pioneer. But its approval was contingent on Scott Sheffield, the former Pioneer chief executive, being banned from serving on Exxon’s board, on the basis that he had allegedly colluded with Opec to curtail oil supplies.

Sheffield, who called the allegations “wild and unbelievable”, said the FTC’s antagonistic stance — and its ability to trawl through past communications in discovery — could prompt executives to think twice about striking deals. 

“I’m very concerned that attacking past statements like this will have a chilling effect on the ability and willingness of business leaders to express their views publicly,” he told the FT.

The dealmaking spree has transformed the US oil and gas landscape from one made up of thousands of small-scale operators to one where a few big players hold sway.

Conoco’s latest deal will give it an output larger than supermajor TotalEnergies and on par with BP, according to consultancy Wood Mackenzie. Conoco, Exxon and Chevron will together account for 25 per cent of remaining US shale oil resources, Rystad calculates.

While many of the biggest deals have been done, industry executives say plenty more consolidation is yet to come.

“The horse is out of the barn on M&A and we expect the arms race for scale to continue,” said Mark Viviano, portfolio manager at private equity group Kimmeridge.

La société japonaise Takata, à l’origine des défauts d’airbags sur les Citroën C3 et DS3 massivement rappelées, a en réalité équipé plus de 100 millions de véhicules dans le monde entier.

Citroën n'est pas le seul constructeur a avoir subit des rappels. Après le rappel massif de 600 000 véhicules vendus entre 2007 et 2019, pour un souci d’airbags défectueux, d’autres marques sont visées au fur et à mesure. Le 22 avril dernier, c’était le constructeur Seat qui s’est adressé à ses clients, leur signalant que leur Seat Altea Freetrack pouvait avoir des défaillances. En réalité, il s’agit plus globalement de tous les équipements fabriqués par la société japonaise Takata qui sont défectueux.

Comme le recense l’association UFC-Que choisir, en 2019 déjà, Ford et Honda avaient fait revenir des voitures en atelier. Audi, Mazda et Toyota ont, eux, procédé à des rappels jusqu’en 2020. Land Rover, Skoda et Volkswagen ont rappelé de nombreux véhicules en 2023. En mars dernier, BMW avait rappelé 20 000 véhicules : des modèles de Série 1, Série 3 et X3. Au total, une quinzaine de marques sont concernées par ces défaillances, pour plus d’une centaine de modèles de voitures.

Le souci est d’autant plus contraignant et touche donc davantage de marques. Rien d’étonnant, lorsque l’on sait que la société japonaise, qui a fait faillite en 2017, a équipé plus de 100 millions de véhicules à travers le monde. Ce vendredi 31 mai, c’est le constructeur Nissan qui a rappelé près de 84 000 de ses véhicules. Il s'agit des Nissan Sentra (modèles 2002-2006), des Nissan Pathfinder (2002-2004) et des Infiniti QX4 (2002-2003). Selon le régulateur américain, 27 décès et au moins 400 blessés ont jusqu'à présent été officiellement attribués aux États-Unis à des airbags défectueux de la société japonaise Takata.

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Last week’s slowdown continued, as big rounds were hard to come by this week. One big AI round likely helped boost dollar figures — and interest — but aside from that large funding, rounds dried up. It was a holiday week, so that could be a reason — or maybe VCs’ checkbooks are cooling off after a strong start to the year when it came to nine-figure rounds.

1. xAI, $6B, artificial intelligence: Elon Musk’s generative AI startup, xAI, officially announced its long-awaited fundraise — making it the second-most-valuable generative AI company in the world behind only competitor OpenAI. The $6 billion round included investment from the likes of Valor Equity Partners, Andreessen Horowitz, Sequoia Capital and Fidelity Management & Research Co., among others. The new funding values the company at $24 billion post money, well behind OpenAI’s $86 billion valuation but well ahead of the $18 billion generative AI startup Anthropic is now valued at after its last raise. The xAI round had been rumored for months. The company was announced just last July and released its ChatGPT competitor, Grok, last November, and introduced its latest AI model, called Grok-1.5, just earlier this year. Grok is trained off data from another Musk-owned company, X, formerly Twitter.

2. Solutions by Text, $110M, fintech: Paying bills has gotten dramatically easier in the past few decades thanks to online and mobile payments. However, a Dallas-based startup has taken it a step further. Solutions by Text is exactly what it sounds like, and the startup locked up a fresh $100 million of funding this week. The raise is a mix of equity and debt, although the exact ratio was not disclosed. Edison Partners and StepStone Group co-led the equity portion. The startup allows its customers the ability to conduct an array of financial services over text, including loan origination, collections and bill payment. Founded in 2008, the company has raised $145 million, per Crunchbase.

3. Frore Systems, $80M, mechanical engineering: One aspect of AI that is likely to see more funding is some of the technologies on the periphery that make it possible. Frore Systems secured an $80 million Series C led by Fidelity Management & Research Co. The San Jose, California-based startup has developed a solid-state active cooling chip — AirJet — that allows users to leverage AI even on the edge of networks or on edge devices. Since AI applications generate more heat than many devices can handle, the chip allows them to remain cool and not lose performance. Founded in 2018, Frore has raised $196 million, per the company.

4. Mavenir, $75M, network software: Mavenir may look familiar on this list to some. After raising $250 million in 2022, the network software provider locked up another large tranche of money, closing a $100 million round led by Siris Capital Group about a year ago. The Richardson, Texas-based company was at it again this week, raising a $75 million investment from “an existing investor,” according to the company. Mavenir builds cloud-native software that allows enterprises and service providers to manage complex networks without relying on older telecom hardware such as routers and switches. This allows customers to scale operations more quickly on the cloud and without the expense of equipment. Founded in 2005, the company has now raised $1 billion, per Crunchbase.

5. CinRx Pharma, $73M, biotech: This week’s top biotech round isn’t as big as it is on most weeks, but that follows the general trend. CinRx Pharma closed a $73 million round from undisclosed investors. The Cincinnati-based firm has a diverse portfolio of companies developing a variety of medicines and therapies. In early 2023, one of its former portfolio companies — CinCor Pharma — was acquired post-IPO by AstraZeneca in a deal worth $1.3 billion upfront. Founded in 2015, CinRx has raised $176 million, per the company.

6. BabylonChain, $70M, blockchain: Palo Alto, California-based BabylonChain, a developer of security protocols for decentralized systems, completed a $70 million round led by Paradigm. Founded in 2022, the company has raised $103 million, per Crunchbase.

7. (tied) Squared Circles, $40M, consumer: Los Angeles-based Squared Circles, a consumer-focused studio incubating consumer brands, closed a $40 million Series A funding round led by L Catterton. Founded in 2020, this is the firm’s first disclosed fundraise amount, per Crunchbase.

7. (tied) Transcend, $40M, privacy: San Francisco-based Transcend, a data privacy platform, raised a $40 million Series B funding led by new investor StepStone Group. Founded in 2017, Transcend has raised nearly $90 million, per the company.

9. Gameto, $33M, biotech: New York-based Gameto, a biotech firm dedicated to women’s health, raised a $33 million Series B led by Two Sigma Ventures and RA Capital Management. Founded in 2020, the company has raised $73 million, per Crunchbase.

10. Reibus, $30M, industrial: Atlanta-based Reibus, an independent metals marketplace, raised a $30 million round in a combination of equity and debt from existing investors including Canaan Partners and Nosara Capital. Founded in 2018, the company has raised nearly $132 million, per Crunchbase.

No company came close to raising what xAI did. The biggest round outside the U.S. came from a Nordic country.

The lawsuit claimed Hermès only gives customers with “sufficient purchase history” a chance to buy a Birkin bag.

US consumers suing French luxury house Hermès have broadened their lawsuit accusing the company of forcing buyers to spend thousands of dollars on other products before they can purchase one of the company’s famed Birkin bags.

Another California resident joined the lawsuit in San Francisco federal court on Thursday, becoming the third named plaintiff in the proposed class action that was first lodged in March.

The lawsuit claimed Hermès only gives customers with “sufficient purchase history” a chance to buy a Birkin bag, which are handmade and can cost thousands of dollars.

The newly amended complaint also added more details about the purported market for luxury handbags, in a bid to defeat Hermès’ initial arguments seeking to dismiss the case.

“The nominal retail price of a Birkin bag is a facade, masking a hidden lottery system that forces consumers to purchase substantial amounts of Hermès ancillary products to ‘qualify’ for the mere opportunity to buy a Birkin,” the amended lawsuit said.

Hermes and its legal team at Latham & Watkins did not immediately respond to requests for comment. Lawyers for the plaintiffs declined to comment.

In a filing last month, Hermès called the lawsuit “far-fetched.” Hermès told the court that customers without a purchase history can still buy a Birkin, and it argued that such a requirement would not be illegal in any case.

“Hermès faces clear competition from different sellers on the wide range of products it sells,” the company said.

Thursday’s amended complaint said “the Birkin bag’s exclusivity, limited availability, and iconic status make it difficult to find a perfect substitute.”

The buyers said offerings from rival luxury brands such as Gucci, Prada and Louis Vuitton “lack the unique brand identity and exclusivity that define the Birkin bag.”

The new complaint also pointed to statements that Hermes made in a 2022 trademark lawsuit it brought against artist Mason Rothschild.

In that case, Hermès said the Birkin’s “mysterious waitlist, intimidating price tags and extreme scarcity have made it a highly covetable ‘holy grail’ handbag that doubles as an investment or store of value.”

This week, the gemstone giant said it would stop making lab-grown diamonds for jewellery to focus on marketing the “unique attributes” of natural stones. Stakes are high after sales plummeted in 2023, and as owner Anglo-American explores a sale or spin-off.

In 2018, De Beers, the 136-year-old diamond company, shocked the jewellery industry when it announced that after years of resistance, it would begin selling lab-grown stones through a new brand called Lightbox.

Just six years later, on Friday, De Beers announced at the JCK jewellery trade show in Las Vegas that it would stop producing lab-grown diamonds for jewellery. Lightbox will continue to exist, but will source stones from existing inventory. New production will be focused on “industrial and technological applications,” and future sourcing will be considered “in due course,” according to the company.

In an exclusive interview with The Business of Fashion, De Beers chief executive Al Cook said the company is rolling out a new strategy called “Origins” to revive interest in its core business of mined diamonds, marketing them as a category, rather than simply marketing the De Beers brand.

”We truly believe we need to do better by telling the story of where the natural diamond comes from; why it’s so special,” Cook told BoF.

To do so, it’s making changes across its business. De Beers is inking new partnerships with Chinese jewellery giant Chow Tai Fook and Signet, the parent of mall mainstay jewellery brands like Kay, Zales and Jared and the largest seller of diamond jewellery worldwide, to highlight natural — also known as mined — diamonds. In the third quarter, De Beers and Signet will roll out a new campaign highlighting what it says are the “unique attributes of natural diamonds.”

Technology will also play a role: This week, it unveiled a new diamond verification instrument that can distinguish between mined and man-made diamonds, both loose and in settings, and plans to use blockchain technology that can be used to show the eventual buyer exactly where their stone came from.

As part of its “Origins’' strategy, De Beers will also eliminate $100 million in costs through restructuring and selling off non-diamond assets.

“In an era where nothing is what it seems to be, where there’s artificial intelligence, there’s deep fakes, people want authenticity,” Cook said. “A natural diamond is by definition, the epitome of authenticity. It was created a billion years ago. There are fewer and fewer of them being produced. We believe it was the right time to come back and to tell that story.”

For much of the 20th century, De Beers controlled the world’s diamond trade, and as such, much of its marketing revolved not around the De Beers brand, but the diamond category as a whole. In 1947, it essentially invented the concept of a diamond engagement ring back in 1947 with its now iconic “A Diamond Is Forever” campaign.

But by a few years into the new millennium, legal challenges had eroded De Beers’ control of the industry, and its marketing shifted to be more De Beers-specific. In 2015, the Diamond Producers Association was formed to fill that void, and in 2020, it rebranded to the Natural Diamond Council “in anticipation of a need to speak very specifically to the unique values of natural diamonds,” said David Kellie, chief executive of the NDC. Today, the organisation still markets that proposition, positioning mined diamonds as “real, responsible and rare.” Just this week, it dropped its latest campaign starring actress Lily James.

But De Beers still needs to do more to convince consumers that despite the fact that their variations are indistinguishable to the naked eye, natural and lab-grown diamonds are, in fact, different — for both the industry’s sake and De Beers’ itself.

After two blockbuster years during the pandemic, De Beers had a very tough 2023: Sales fell by a third, forcing it to drastically pull back on diamond production and stockpile stones in a bid to stop slumping prices. At its first sale of 2024, it cut prices by 10 percent.

The stakes for a turnaround are high as majority owner Anglo-American explores options to divest from the company, including a sale or spin off. The collapse of a $49 billion takeover deal of Anglo-American from its rival BHP could add further pressure to separate from its underperforming gemstone unit.

Diamond suppliers generally have faced a challenge in consumers’ embrace of lab-grown diamonds, which has been growing for the past decade. In 2023, they made up around 17 percent of the overall market, according to diamond research firm Edahn Golan. A survey from wedding website The Knot also found that 46 percent of couples planned to select a lab-grown stone for their engagement rings.

But as demand for lab-grown diamonds has grown, so has supply, which has impacted prices. Lab-grown stone prices have fallen since 2015: Then, a man-made stone was sold at about a 10 percent discount to a mined one, today that number is about 90 percent.

In that sense, it’s an effective moment for natural diamonds to make a marketing comeback.

When it comes to selling jewellery, “marketing is the most important factor,” said diamond industry analyst Paul Zimnisky.

“It’s establishing natural diamonds as a product category,” he said, adding that doing so is more necessary today, as the industry faces “immense competition from lab grown diamonds but also just other luxury discretionary products and just a younger generation of consumers that wasn’t exposed to ‘A Diamond Is Forever’.”

That generation now has a chance to get to know the campaign for themselves after De Beers relaunched “A Diamond Is Forever” last year. Of course, it’s a very different environment: There’s endless competition for consumer attention, and to bring the iconic campaign into the 20th century, it’ll need some updates.

“It’s about marketing towards the diverse people who want to mark the most important moments in their life with a diamond,” said Cook. “In 1947, that was a white boy meets a white girl, that’s not the case now.”

The imagery De Beers released as part of the campaign last fall focussed on highlighting their diamonds’ natural components, with taglines like “Artist credit: Mother Nature,” and “Nature’s mic drop.” The company is also planning to ramp up its messaging around its sustainability efforts, including plans to be carbon neutral by 2030.

The hope is not to eliminate the competition from lab-grown diamonds, Cook said — a goal that, at this point, would be impossible to achieve. Even luxury labels are buying in, with Prada, watchmaker TAG Heuer and LVMH-owned jeweller Fred all rolling out lab-grown products in recent months. Instead, it’s about positioning and getting consumers to think about the two differently.

“One is a very precious rare stone that you bite to commemorate the most important moments of your life,” said Cook. “The other costs less than the cost of the dinner you’re having to celebrate your engagement.”