APA - Oil and gas leads S&P sectors with shale producers rising on takeover talk

2023-04-10 15:35:29 ET

Energy tops Monday's S&P sector leaderboard, +0.8% , even as U.S. crude oil closed below $80/bbl for its lowest settlement in a week.

Shale producers are moving higher, as reports of Exxon Mobil's ( NYSE: XOM ) interest in a potential deal for Pioneer Natural Resources ( NYSE: PXD ) has traders betting on potential takeover targets for Big Oil companies.

Pioneer ( PXD ) +6.4% after jumping as much as 8.5% for its biggest intraday gain since August 2021, helping lift shale oil peers including Diamondback Energy ( FANG ), +2.1% after rising as much as 4%, and Devon Energy ( DVN ) +1.3% after climbing 3% earlier.

Truist analyst Neal Dingmann said the Permian Basin will be the hottest target for deal activity , as many existing companies want to beef up their positions in the region, and he sees Exxon ( XOM ) and rival Chevron ( CVX ) will be on the hunt, with Diamondback ( FANG ), Devon ( DVN ), Coterra Energy ( CTRA ), APA Corp. ( APA ) and Permian Resources ( PR ) as firms that "could remain active in the M&A market."

While Stifel analyst Derrick Whitfield sees an imminent deal for Pioneer ( PXD ) as unlikely, if Exxon ( XOM ) does buy the company, then Diamondback ( FANG ) and Permian Resources ( PR ) would be " the best derivatives ," with Diamondback the closest peer to Pioneer.

"A substantial premium would be required as Pioneer has time on its side, citing a multi-decade drilling inventory in the Midland basin that bests almost all independents," Cowen analyst Jason Gabelman said.

ETFs: ( NYSEARCA: XLE ), ( XOP ), ( USO ), ( BNO ), ( UCO ), ( DBO ), ( SCO ), ( USL ), ( DRIP ), ( GUSH ), ( USOI ), ( NRGU )

Front-month Nymex crude oil ( CL1:COM ) for May delivery closed -1.2% to $79.74/bbl, its lowest settlement since before Saudi Arabia announced the latest surprise OPEC+ production cuts .

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