Adams and Crooks, The Financial Times, June 9, 2015


s oil prices plunged, so did much of the investment made by large oil corporations. Many projects have been either delayed or scrapped completely. Smaller companies have taken on significant debt, including many US shale companies. With these companies nearing bankruptcy, they run the risk of being purchased by more established names such as ExxonMobil or Royal Dutch Shell. One of the main targets for large corporations such as these are companies rooted in America’s shale-producing heartlands. These shale producers are being targeted for their unconventional oil resources. When oil prices tanked, shale producers improved productivity and became more efficient in order to remain viable. And, with continued improvements, shale production could potentially jump to 15 million barrels per day. At those levels, the US could become the world’s “swing” producer and replace OPEC. Unfortunately, acquisitions threaten to taint the US’s opportunity to do so since many of these shale companies are floundering financially. While a small number of geographically well-positioned shale companies in the US are not feeling the same degree of financial strain that others are, Peter Speer (of Moody’s, the credit rating agency) noted: “If we get to the latter part of this year and into next year, and we don’t have a strong oil price recovery, then we will definitely be seeing more [acquisitions].”

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Watch out for oil industry mergers by Financial Times

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