Cut-Price Deals Show Shale’s Rapid Decline From Debt-Fueled Boom - Bloomberg

Cut-Price Deals Show Shale’s Rapid Decline From Debt-Fueled Boom - Bloomberg:

There is no more dramatic sign of the U.S. shale industry’s fall from grace than one of the best in the business being sold off for less than a third of its peak value.

Concho Resources Inc., an early explorer of the Permian Basin’s once-coveted oil riches that was worth $32 billion just two years ago, is selling for $9.7 billion in stock. ConocoPhillips is paying a meager 15% premium over Concho’s closing price on Oct. 13, the last trading session before Bloomberg News first reported the companies were in talks.

Concho is not alone: More than half of the shale deals this year came with a premium of less than 10% over stock prices that had already plunged in the past couple of years, according to data compiled by Bloomberg.

Shale explorers have rapidly lost favor with Wall Street after years of high debt, poor shareholder returns and value-destroying deals. The devastating impact of the Covid-19 pandemic on oil demand made matters worse, pushing many into bankruptcy. Private equity firm Kimmeridge Energy is among investors urging the highly fragmented industry to seek low-premium deals, gain scale and cut costs.