Chevron (CVX) could be a major player in the already busy M&A environment so far in 2019.
Shares of the San Ramon, Calif.-based super-major rose 2% to $110.82 on Friday amid a rebound in oil prices from their December trough, helping build support for the company to be more aggressive in its business strategy amid a rosier macro environment.
"Chevron has a good balance sheet, they should go buy," Jim Cramer said this morning on the floor of the New York Stock Exchange. "I want Chevron to make some acquisitions."
As such, it might be time to examine some possible oil peers to poach.
Anadarko
First among those ruminated on by Cramer was Anadarko Petroleum Corporation (APC) , largely based upon its substantial decline from its mid-2018 highs that might make the stock a bargain for a bigger fish like Chevron.
The exploration and production company saw its share price nearly halved from July to December 2018 and still remains at a significant discount to longer term average.
"Anadarko is almost back to where it is when they were part of Macondo," Cramer commented. "It's a very good company."
The company might be a bit pricey for Chevron, however, as its surge into the New Year gives it a market cap over $23 billion, which would make it quite the blockbuster.
Endeavor Energy
More prominently and possibly more in Chevron's price range, is Endeavor Energy.
The company is rumored to be bidding against both Exxon Mobil (XOM) and Royal Dutch Shell (RDS.A) for the privately held oil company.
The going price for the company is rumored to be in the $8 billion range after oil's swift crash into year end 2018, according to Real Money's sister publication The Deal.
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 Chevron could still be in the hunt.
CrownRock LP
Moving down the line of targets that would fit within the company's Permian purview would be the privately held CrownRock LP, a company growing large enough for a supermajor oil player 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 not affect shareholder opinion of capital expenditures too much.
Considering the dearth of cheap, private options left in the profitable Permian basin, it would be a surprise to hear that no supermajors are considering making a move on the company.
Asset Action Instead
Analysts speaking to Real Money were skeptical that the company would pursue a large scale acquisition early in 2019 given the market's focus on capital discipline among oil companies.
"There has been lots of M&A for exploration and production companies, but most of the deals have been at the asset level rather than the corporate level," Raymond James analyst Pavel Molchanov told Real Money. "Acreage acquisitions are much more likely than acquiring an entire company."
He added that the market would likely react poorly to the company adding to its debt load with a blockbuster deal, especially as it looks to spend on buybacks, dividends, and oil field expansion.
The company has already actioned some acreage swaps in recent years, including a sizeable $280 million deal with Concho Resources (CXO) . The history at least, makes this a modestly more likely possibility.
Bottom Line
Oil's slide into the New Year could have marked not only an opportunity for investors to buy, but also for companies.
After a blockbuster like Marathon Petroleum's (MPC) merger with Andeavor (ANDV) accelerated hopes of increased M&A activity, it should be no surprise that supermajors with clean balance sheets like Chevron will remain on oil investors' radars.
Still, oil will need to mark more of a recovery before many companies will likely begin to feel comfortable crashing through with a large scale acquisition. As such, private companies might be the best bets at present.
So, while much of the market may want to see Exxon or a Chevron acquire a powerhouse Permian-focused independent operator like Pioneer Natural Resources Co. (PXD) , Diamondback Energy Inc. (FANG) or Concho Resources, it might take some time for a true blockbuster to break through.
