Is E.S.G. Falling Out of Favor? (2024)

Big Oil gets bigger

To oil analysts and investors, Chevron’s $53 billion takeover of Hess confirmed that there’s a new cycle of consolidation in the industry, coming less than two weeks after Exxon Mobil’s $59.5 billion bid for Pioneer Natural Resources.

Even as fossil-fuel producers face pressure from climate-minded policymakers, investors and activists to embrace greener energy — more on that below — they’re instead focusing on getting bigger. That could create a larger gap in the industry between those who have the firepower and freedom to buy rivals, and those who, because of politics or finances, do not.

Chevron and Exxon are acting from a position of strength, striking deals while they sit on billions in cash because of rising oil prices. That’s also reflected in their share prices, which have been climbing, making it attractive to use as deal currency.

Being able to offer stock helped persuade their targets — whose shares have also been rising — to sell. “We’re not only locking in and preserving the value we’ve created over the last several years but we still participate in the upside that you’re talking about,” John Hess, the C.E.O. of Hess, told investors on Monday.

Many in the industry think consolidation is overdue. Investors increasingly aren’t willing to back dozens of drillers pursuing unprofitable exploration projects. “I think we’ve got too many C.E.O.s,” Mike Wirth, the chief executive of Chevron, told analysts on Monday.

Who’s next? News reports have suggested that midsize American shale producers are on the hunt, with Devon Energy looking at Marathon Oil and CrownRock while Chesapeake is studying a bid for Southwestern Energy. Analysts also point to ConocoPhilips, Diamondback and Occidental as being likely to look for deals.