Rivals Vie for Mastery Over America's Hottest Oil Field

Date : 05/06/2019 @ 10:59AM
Source : Dow Jones News
Stock : Chevron Corporation (CVX)
Quote : 114.74  -0.61 (-0.53%) @ 12:18AM
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Rivals Vie for Mastery Over America's Hottest Oil Field

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By Rebecca Elliott, Christopher M. Matthews, Luis Santiago and Renée Rigdon 

Companies are clamoring for a bigger piece of the prolific oil field that has lifted U.S. crude production to records.

Chevron Corp. and Occidental Petroleum Corp., in vying for Anadarko Petroleum Corp., are fighting to control more of the Permian Basin, the chief engine of the U.S. shale boom. Production from the region, which spans more than 75,000 square miles of West Texas and New Mexico, has more than doubled in recent years and makes up about one-third of total U.S. crude output, according to the Energy Information Administration.

Once part of a large body of water that existed more than 250 million years ago, the basin is composed of layers of oil-bearing rock. Companies can now tap the various layers deep underground from a single spot on the surface with horizontal drilling and hydraulic fracturing, making the basin the least expensive place in the U.S. to produce oil via fracking.

Smaller, independent oil companies led the expansion of horizontal drilling in the area, but many of those companies have struggled to earn money consistently. Companies with larger, contiguous acreage positions generally are better able to manage the costs associated with fracking.

Anadarko, Occidental and Chevron are among the Permian's top producers. Chevron announced a deal to buy Anadarko for $33 billion on April 12, but Occidental subsequently went public with its own $38 billion offer.

An Anadarko takeover would put Chevron, already the region's top producer, on track to generate nearly 1.4 million barrels of oil and gas daily in the Permian in 2025, according to Rystad Energy. For Occidental, a deal would allow the company to boost its Permian output to roughly 900,000 barrels of oil and gas a day in that time, the consulting firm said.

The fight for Anadarko could start a broader consolidation in the Permian. Most top drilling locations in the Permian are believed to be taken, experts say, so companies seeking to strengthen their footholds will look to buy rivals. Such speculation has lifted the stocks of other shale companies in the region after Chevron's announced deal for Anadarko.

Write to Rebecca Elliott at rebecca.elliott@wsj.com and Christopher M. Matthews at christopher.matthews@wsj.com

 

(END) Dow Jones Newswires

May 06, 2019 05:44 ET (09:44 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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