Shares of the Houston-based petroleum firm fell quickly in morning trading after news that its higher bid wasn't enough to capture Anadarko. CNBC reported that the OXY bid more than $70 a share for Anadarko in cash and stock.
The deal also reportedly included a 3% breakup fee and was subject to a shareholder vote. The Chevron deal does not include that requirement.
However, the interesting nugget in the reporting on Occidental is that the company is still considering options and it might not be the only one. Exxon is reportedly considering its options as well.
Even if it might often be a "fool's game" to speculate like this, as Cramer warned, an assessment of the options is in order. Especially, as each of the targets touted by Cramer are flying high on the enthusiasm.
Pioneer Natural Resources
One of the key attractive features of the Permian basin is its nearly 4 million barrel a day production rate which is slated to double in a matter of years.
A major player in the basin is Pioneer Natural Resources and the market is moving its stock upward like it could be a top target.
The company boasts a deep inventory of low-cost oil drilling locations, an attractive balance sheet, and a low breakeven cost that could justify that stock move.
The company is currently valued at about $28 billion, which would make it the most comparable splash another super major could make to show its serious about M&A after Chevron's big buyout.
Cimarex stock is surging today as well, mainly for its strong similarity to Anadarko and its relative inexpensiveness compared to APC.
Cimarex is also attractive because a larger producer could help it solve the issue confronting the company, namely the fact that it is landlocked in the Permian Basin, forcing the company to accept lower realized prices in oil and natural gas than the market rate.
This could end up making it a win-win in a deal.
Apache Corp. (APA) could be another attractive target if Occidental or Exxon is seeking to make a splash, but will also be significantly cheaper than Anadarko might have been.
Shares pumped up about 3% in morning trading as the market seems to appreciate the possibility of its purchase by a bigger oil name.
Jim Cramer has called the company "best in class" as recently as March, comparing it to both Anadarko and Cimarex. Obviously, if the other two were on shortlists, an Apache acquisition is one to monitor as well.
The company is particularly attractive as the Permian is one of its core growth areas, with over 2.8 million gross acres owned, aided by a 2010 purchase of land from BP as the company unloaded assets to deal with the Deepwater Horizon disaster payments.
Additionally, the company has significant exposure to the Bakken basin in North Dakota. In an arms race where shale is again profitable, this region could again become an interesting play that bigger players may want to invest in.
Concho Resources is an interesting look into the Permian basin as well, especially as it has not been averse to acreage swaps in recent years, including a sizable $280 million deal with Chevron.
At the very least, it suggests it is a company that can come to the table.
On the other end, the company recently picked up more property in Permian, making it the largest unconventional shale producer in the region with 27 rigs.
The company acquired RSP Permian in a deal last summer in an all stock transaction valued at $9.5 billion.
"We are excited to complete this transaction and welcome the RSP team to Concho. By combining two great companies focused on the highest quality resources in the Permian Basin, we are creating a compelling enterprise with the scale and technical expertise necessary to compete globally," Concho CEO Tim Leach said at the time. "The transition to large-scale development has been one of our most important operational and strategic priorities. RSP's incredible asset base enhances our development platform within the Permian Basin to drive continued performance, innovation and stronger returns for our shareholders."
That thesis could make the acquisition prospects for a major producer more attractive as well.
The last high flyer that should be noted on Friday is Devon Energy (DVN) .
Shares of the Oklahoma City-based oil company surged, outpaced by only a select few stocks including Concho.
Much like Concho, it has shown an interest about at least selling assets in the Permian Basin and could be open to an enticing offer from a major.
In 2018, the company offloaded $4.4 billion in assets including a $3.125 billion sale of the company's stake in EnLink Midstream to Global Infrastructure Partners, and a $200 million sale of Permian-adjacent Delaware basin assets.
The company is interesting not only for its properties in the Delaware basin but in the still developing Powder River Basin in Wyoming.
This basin was a big factor for Anardarko given it calls itself ""one of the largest landowners, leaseholders and taxpayers in the state of Wyoming." A large amount of that land is in the Powder Basin.
The Journal of Petroleum Technology notes that there have been many hiring events in the area to build out workforces for shale drillers. That piece of evidence could suggest an underappreciated aspect of the acquisition appetite that bigger companies could be catching onto.
A "powderkeg" if you will.
Time for a call back...
Considering Chevron's buyout of Anadarko was anticipated by Real Money in January, it might be wise to acknowledge smaller private targets touted as possibilities as well.
Texas-based Endeavor Energy has been the subject of M&A discussion for quite some time and the Anadarko deal could be a key catalyst for the company to finally move off the block.
The privately-held energy producer was rumored to be at the center of a bidding was between Exxon Mobil and Royal Dutch Shell late last year that fell out of headlines to begin 2019.
The going price for the company was rumored to be $8 billion in December, but could certainly have ticked higher as oil's recovery story has come into view.
The company, which is owned by the family of onetime billionaire Autry Stephens, a Texas wildcatter who has drilled in the Permian basin region for more than 50 years, is rumored to be closer to the close of a deal with Shell, but the lack of news as of late could provide an opening for Occidental to poach some Permian territory.
Moving down the line of targets would next be privately-held CrownRock LP, a company growing that's large enough for major oil players to consider.
The producer holds north of 100,000 gross acres and around 84,000 net acres in the northern Midland Basin, producing roughly 50,000 barrels of oil equivalent per day while operating nearly 1,000 wells.
Given the reported price tag of Endeavor, the company could be a quick tuck-in acquisition that would be more amenable to a shareholder vote that OXY might prefer.
Considering the dearth of cheap, private options left in the profitable Permian basin, it would be a surprise to hear that the company would not at least be on the radar of M&A speculators.
The field is wide open for energy plays, and Cramer is correct to warn of a "fool's game" of speculation.
It is also worth noting that as much as the big oil names may want to buy out these companies, it takes two to tango. Anadarko's rejection of Occidental bears that out.
"This is tough because I think these are proud companies that don't want to sell," Cramer acknowledged.
However, if other industries offer insight into how one big deal can beget another, picking the right option could potentially be very profitable very soon.
For more of Jim's thoughts tune into the Action Alerts PLUS members call taking place now!