Paul Sankey, president and lead analyst at Sankey Research, has emphasized Guyana’s status as a prime takeover target due to its exceptional oil assets, marking it as a global leader in the industry.
Speaking on Chevron’s recent acquisition of Guyana’s oil assets, Sankey pointed out that Guyana holds the world’s most coveted oil resources, with its substantial reserves making it an attractive target for major players in the sector. The move by Chevron, therefore, was seen as a strategic maneuver to secure a significant foothold in this valuable market.
“…We know Guyana is the best asset in global oil. It is remarkable, so we had it trading as a takeover play,” he explained.
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Regarding the acquisition, Sankey touched on the price and the premium Chevron paid. Despite Guyana’s premier status, the acquisition was completed with just a 5% premium, which Sankey considered somewhat low. The fact that Chevron managed to secure the assets at a relatively modest premium was unexpected, as Sankey had initially anticipated a higher premium and a share price closer to US$200 per share.
From Chevron’s perspective, the acquisition was seen as a significant move, Sankey added. The company had a heavy exposure to Kazakhstan, which involved travel through Russia, a crucial aspect of their strategy for the next decade. Chevron’s existing strength in the Permian Basin also aligned well with the newly acquired assets.
Sankey’s analysis suggests that the consolidation trend in the shale industry is likely to continue, with larger companies seeking to grow through acquisitions. He noted that bigger companies receive “better multiples”, while medium-sized companies face challenges in this regard. Sankey cited the example of Exxon and Chevron, which boast the highest multiples in the sector.
The interview also discussed the possibility of further consolidation in the sector, with other companies like Devin and Marathon Oil mentioned as potential acquisition targets to increase their scale.
In Sankey’s view, with Chevron’s recent acquisition, the industry may witness more significant deals and mergers as companies seek to strengthen their positions in the sector.
