JAG - The Oil Stock Merger Wave Continues Despite Investor Disapproval
Oil stocks have been terrible investments in recent years. Over the last three years, the average U.S. oil producer (as measured by the iShares US Oil & Gas E&P ETF) has produced a total return of negative 17%. That decline came even though the U.S. oil benchmark price has rebounded 5%.
Oil companies can't seem to do anything to get out of their funk of chronic underperformance. They've tried growing their oil production, selling assets to bolster their balance sheets, and returning cash to investors through dividends and buybacks. More recently, they've pursued consolidation in hopes that headline-grabbing deals would excite investors.
Of all those options, investors seem to dislike M&A the most. That's evident by the way they've been punishing producers that announce deals. However, despite investor disapproval, oil companies continue to pursue this strategy in hopes that they'll find a blueprint that investors will like.