Drilling for dollars
Deals in black gold
Good morning, trusty roughnecks. This is your Stock Market Rundown for October 12th, 2023. Thank you for being a reader. Let’s drill in:
TODAY’S TOP STORY: TEXAS TEA TIME 🛢️
With surging oil prices bolstering your piggy-bank of cash reserves, why drill for barrels when you can just buy them? ExxonMobil just announced it’s acquiring shale megaproducer Pioneer Natural Resources.
This is Exxon’s biggest deal since buying Mobil in 1998, and hands them control of the premier producer in the lucrative Permian Basin, a sprawling oil patch that stretches across the dusty plains of west Texas.
In the 2010s, novel resource-extraction techniques like horizontal drilling and hydraulic fracking kicked off a boom in the Permian, unlocking billions of barrels of oil and gas reserves. Today, the basin gushes cash 24/7, which is why Exxon is salivating over Pioneer’s assets.
Wall Street experts say the deal makes Exxon “the 800-pound gorilla in the Permian,” and could kick off a consolidation wave in the US oil and gas industry.
You might think this tie-up of titans would risk pushback under competition laws. But oil and gas mergers don’t typically attract antitrust challenges, because commodity prices are set in global markets.
Which is exactly why running an oil company is such a pain in the ass. Even if you operate your business like the proverbial well-oiled machine, all your efforts could be swamped by a devastating dip in the oil price.
Forget owning oil wells. I’d rather own a gas station on a busy turnpike… at least then I can boost my margins by selling Slim Jims.
SO WHAT ELSE IS GOING ON?
All those commercials during NFL games are obviously working: the maker of Corona and Modelo beers reported an earnings beat on robust demand from suds-drinkers.
Famed portfolio manager Bill Gross is advising investors to shun stocks, saying equities are “clearly overvalued” and “bonds are a better deal”—for now, anyway. (Bill used to run a trillion-dollar bond portfolio, so he knows his stuff on capital-markets topics.)
Isn’t it ironic? A new electric vehicle battery plant in Kansas needs so much power that the local utility is extending the life of a coal-fired plant to serve it with juice. Environmentalists are pissed. Cheer up, fellas: this is what an energy transition looks like.
Golden Goose, maker of “distressed look” luxury running shoes, is planning to go public in 2024. If you really want a sneaker that looks scuffed, consider saving $400 by buying a pair of Sketchers and wearing them while you mow the lawn.
That’s it for today, my friends; see you again as usual tomorrow morning. Yours in capitalism, The Axe