Malaysia’s Petronas, the national state oil and gas company, is in talks to take over Permian driller DoublePoint Energy, Bloomberg reported, citing sources in the know who declined to be named because the talks are private.
Still at an early stage, if these talks end in a deal, it could fetch several billion dollars, the sources also said.
DoublePoint Energy has 95,000 net acres in the Permian and produces some 40,000 bpd of crude as of April. This could make it an attractive target for Petronas, but based on what we have seen in the M&A space, the target will only be acquired if the price is right.
If a deal does take place, however, it would go a long way to rekindle optimism that, despite the unprecedented crisis that struck the industry this year, dealmaking is beginning to recover. Such an injection of optimism came after Chevron decided to acquire Noble Energy, but its effect was shortlived as it remains one of few deals in the oil and gas space since the start of the pandemic.
Buyers are extra-careful this time around because of the unusual degree of uncertainty. In a “normal” crisis, both industry players and private equity firms would vie for cheap assets safe in the knowledge that oil demand would inevitably rebound, allowing them to profit from their bargain.
This is not the case anymore.
No one in the industry has been unscathed by the fallout from the pandemic. Petronas is no exception: the company reported a 68-percent drop in profits for its first quarter and said it would shrink spending by 21 percent this year to weather the crisis. The state major also said it would pursue operating cost cuts of 12 percent in 2020.
In such an environment where cost cuts take precedence over any future production growth, the progress from talks to a deal is highly uncertain. If it does happen, it will provide a much-needed mood boost to a struggling industry.
