Exxon eyes oil M&A as clean energy shift seen taking decades

HOUSTON (Bloomberg) - Exxon Mobil CEO Darren Woods is eyeing oil and natural gas deals despite calls to reduce emissions, saying any shift in the world’s energy supply will take decades.

“Energy transitions take a long time,” Woods said Wednesday at the Barclays CEO Energy-Power Conference in New York. “In the meantime, the world’s rising demand for energy must be met.”

Exxon sees oil demand growing at 0.6% per year over the long term and demand for natural gas increasing 1.3% per year even as policy makers look for ways to wean countries off of fossil fuels. That means significant new investments, including acquisitions, will be needed, Woods said, even though shareholders are calling for Big Oil to reduce spending and return more cash to shareholders.

More consolidation is in the offing for independent shale drillers, and Exxon will be watching for potential acquisition targets, he said.

“If there is the opportunity to acquire something that bring unique value to Exxon Mobil, we’ll be in a position to transact on that,” Woods said.

In the Permian basin of West Texas and New Mexico, where share prices of frackers have plunged in the past year, Exxon is keeping a “watchful eye” for deals, Woods said. “I expect consolidation to happen over some period of time.”

While its biggest U.S. rival, Chevron Corp., made an unsuccessful attempt to buy Anadarko Petroleum Corp. earlier this year -- eventually losing out to a $38 billion offer from Occidental Petroleum Corp. -- Exxon has remained on the sidelines. That wait-and-see approach comes as frackers struggle with disappointing well performance and relentless cash burn.

“Right now there’s some time,” Woods said. “I think people need to recalibrate what they’re experiencing in that unconventional space and that will have an impact on how people value companies.”

Chevron will be “opportunistic” in making acquisitions, Chevron’s North America head Jeff Gustavson said that the same conference. Any deal would have to be a strategic fit and be good value, he said without naming any targets.

But it’s not just the Permian that’s of interest to the majors. Even though Exxon is spending heavily on megaprojects including deepwater oil drilling in Guyana and liquefied natural gas production in Papua New Guinea, the company will “retain the capacity for a sizable acquisition,” Woods said..

He’ll look for deals at the bottom of the price cycle, he said. “Those are where we’ll see value opportunities.”