By David French, Jessica Resnick-Ault and Devika KrishnaKumar
April 12 (Reuters) - Oil major Chevron Corp's $33billion deal on Friday to acquire Anadarko Petroleum Corphas some investors and industry executives askingwhether it is time for other U.S. shale oil and gas producers toconsider selling themselves.
Anadarko has been one of the pioneers of the shalerevolution, which turned the United States into the world'sbiggest oil producer, overtaking Russia and Saudi Arabia. TheHouston-based company's willingness to ink a sale, rather thancapitalize on oil prices rebounding, illustrates the significantchallenges facing many U.S. shale producers.
These challenges include exploration and productionbecoming more expensive, as the oil and gas that is easier toaccess gets scarcer and existing wells turn less productive.Deep-pocketed oil majors such as Chevron can better cope withthese costs, because they can get cheaper drilling rates bycommitting to longer contacts and afford cutting-edge technologyto get more out of wells.
Shale producers such as Pioneer Natural Resources,Continental Resources, Diamondback Energy andConcho Resources have already been under pressure frominvestors to improve their profitability. Many investors now sayChevron's deal will embolden them to grill companies in thesector whether it is time to throw in the towel and sell.
"If you have large acreage positions like Pioneer andConcho, or lesser but more contiguous positions like ParsleyEnergy, and you're a pure-play Permian producer, there'sno doubt that you are on the radar screen for these majors,"said Rob Thummel, portfolio manager at Tortoise CapitalAdvisors.
Pioneer, Concho and Parsley shares rose 11.5 percent, 8.8percent and 11.7 percent respectively on Friday following theannouncement of the sale of Anadarko, amid investor speculationover who the next takeover target will be.
U.S. financial services firm Cowen & Co said independentproducers expect to spend about 11 percent less in 2019, whilemajor oil companies plan to spend about 16 percent more.
Pioneer, one of the Permian's largest producers, said inFebruary it plans to reduce 2019 capital expenditures by 11percent, or about $350 million, in an effort to appeaseinvestors.
While there has been dealmaking in the last 12 months - bothConcho Resources Inc and Diamondback Energy Inchave bought rivals - many of the large producers which spentyears gobbling each other up have been sitting on their hands,under shareholder pressure to focus on creating strongerreturns.
The sale of Anadarko could likely change that for potentialacquirers, including ConocoPhillips and OccidentalPetroleum Corp, the two largest U.S. independents behindthe majors. Occidental was the rival bidder that lost out toChevron in the race to buy Anadarko, sources said on Friday.
"At some point in time in the next few years the majors mayreach out," Pioneer CEO Scott Sheffield told Reuters this week,before Chevron's acquisition was announced.
He declined to comment on whether majors had approachedPioneer directly.
Asked about his appetite for deals in February, Conoco CEORyan Lance said it would have to be an unusual opportunity forthe company to consider an acquisition."We are not feeling any pressure to do anything," he said.
RUNNING OUT OF INVENTORY
Given the substantial production forecasts being offered bysome of the majors such as Exxon Mobil Corp, they willneed to acquire new acreage at a big scale to offset the oftensharp declines experienced by shale wells.
The majors "are eventually going to run out of inventory,"said Pioneer's Sheffield. "They are drilling their inventoryfaster than the independents, so they are going to run out a lotfaster, in my opinion."
BP Plc and Royal Dutch Shell Plc, which lagpeers like Exxon and Chevron in the Permian, could makeacquisitions to gain more exposure to the formation, analystssaid.
Shell was seen as the leading contender to buy privatelyowned Permian producer Endeavor Energy, people familiar with thetransaction told Reuters, but the two companies have, so far,failed to agree on Endeavor's valuation.
Shell is further constrained by its target to spend only $30billion on capital projects in 2019, including acquisitions,said Noah Barnett, an analyst at Janus Henderson.
(Reporting by David French, Jessica Resnick-Ault and DevikaKrishna Kumar; Editing by Greg Roumeliotis and Cynthia Osterman)
