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Prices at a Chevron Corp. gas station in Fontana, California, on Thursday, July 8, 2021.

Kyle Grillot | Bloomberg | Getty Images

On Monday, Chevron announced plans to acquire oil and gas company Hess for $53 billion in stock.

Less than two weeks prior, Exxon Mobil announced it is acquiring oil company Pioneer Natural Resources for $59.5 billion in stock.

On Tuesday, the International Energy Agency released its annual world energy outlook report that projects global demand for coal, oil and natural gas will hit an all-time high by 2030, a prediction the IEA’s executive director Fatih Birol had telegraphed in September.

“The transition to clean energy is happening worldwide and it’s unstoppable. It’s not a question of ‘if,’ it’s just a matter of ‘how soon’ — and the sooner the better for all of us,” Birol said in a written statement published alongside his agency’s world outlook. “Taking into account the ongoing strains and volatility in traditional energy markets today, claims that oil and gas represent safe or secure choices for the world’s energy and climate future look weaker than ever.”

But based on their acquisitions, Chevron and Exxon are seemingly preparing for a different world than the IEA is portending.

“The large companies — nongovernment companies — do not see an end to oil demand any time in the near future. That’s one of the messages you have to take from this. They are committed to the industry, to production, to reserves and to spending,” Larry J. Goldstein, a former president of the Petroleum Industry Research Foundation and a trustee with the not-for-profit Energy Policy Research Foundation, told CNBC in a phone conversation Monday.

“They’re in this in the long haul. They don’t see oil demand declining anytime in the near term. And they see oil demand in fairly large volumes existing for at least the next 20, 25 years,” Goldstein told CNBC. “There’s a major difference between what the big oil companies believe the future of oil is and the governments around the world.”

So, too, says Ben Cahill, a senior fellow in the energy security and climate change program at the bipartisan, nonprofit policy research organization, Center for Strategic and International Studies.

“There are endless debates about when ‘peak demand’ will occur, but at the moment, global oil consumption is near an all-time high. The largest oil and gas producers in the United States see a long pathway for oil demand,” Cahill told CNBC.

Pioneer Natural Resources crude oil storage tanks near Midland, Texas, on Oct. 11, 2023.

Bloomberg | Bloomberg | Getty Images

Africa, Asia driving demand

Globally, momentum behind and investment in clean energy is increasing. In 2023, there will be $2.8 trillion invested in the global energy markets, according to a prediction from the IEA in May, and $1.7 trillion of that is expected to be in clean technologies, the IEA said.

The remainder, a bit more than $1 trillion, will go into fossil fuels, such as coal, gas and oil, the IEA said.

Continued demand for oil and gas despite growing momentum in clean energy is due to population growth around the globe and in particular, growth of populations “ascending the socioeconomic ladder” in Africa, Asia and to some extent Latin America, according to Shon Hiatt, director of the Business of Energy Transition Initiative at the USC Marshall School of Business.

Oil and gas are relatively cheap and easy to move around, particularly in comparison with building new clean energy infrastructure.

“These companies believe in the long-term viability of the oil and gas industry because hydrocarbons remain the most cost-effective and easily transportable and storable energy source,” Hiatt told CNBC. “Their strategy suggests that in emerging economies marked by population and economic expansion, the adoption of low-carbon energy sources may be prohibitively expensive, while hydrocarbon demand in European and North American markets, although potentially reduced, will remain a significant factor.”

Also, while electric vehicles are growing in popularity, they are just one section of the transportation pie, and many of the other sections of the transportation sector will continue to use fossil fuels, said Marianne Kah, senior research scholar and board member at Columbia University’s Center on Global Energy Policy. Kah was previously the chief economist of ConocoPhillips for 25 years.

“While there is a lot of media attention given to the increasing penetration of electric passenger vehicles, global oil demand is still expected to grow in the petrochemical, aviation and heavy-duty trucking sectors,” Kah told CNBC.

Geopolitical pressures also play a role.

Exxon and Chevron are expanding their holdings as European oil and gas majors are more likely to be subject to strict emissions regulations. The U.S. is unlikely to have the political will to force the same kind of stringent regulations on oil and gas companies here.

“One might speculate that Exxon and Chevron are anticipating the European oil majors divesting their global reserves over the next decade due to European policy changes,” Hiatt told CNBC.

“They are also betting domestic politics will not allow the U.S. to take significant new climate policies directed specifically to restrain or limit or ban the level of U.S. oil and gas domestic production,” Amy Myers Jaffe, a research professor at New York University and director of the Energy, Climate Justice and Sustainability Lab at NYU’s School of Professional Studies, told CNBC. 

Goldstein expects the ever-expanding U.S. national debt will eventually put all kinds of government subsidies on the chopping block, which he says will also benefit companies such as Exxon and Chevron.

“All subsidies will be under enormous pressure,” Goldstein said, the intensity of that pressure dependent on which party is in the White House at any given time. “By the way, that means the large financial oil companies will be able to weather that environment better than the smaller companies.”

Also, sanctions of state-controlled oil and gas companies in countries like those in Russia, Venezuela and Iran are providing Exxon and Chevron a geopolitical opening, Jaffe said.

“They likely hope that any geopolitically driven market shortfalls to come can be filled by their own production, even if demand for oil overall is reduced through decarbonization policies around the world,” Jaffe told CNBC. “If you imagine oil like the game of musical chairs, Exxon Mobil and Chevron are betting that other countries will fall out of the game regardless of the number of chairs and that there will be enough chairs left for the American firms to sit down, each time the music stops.”

An oil pumpjack pulls oil from the Permian Basin oil field in Odessa, Texas, on March 14, 2022.

Joe Raedle | Getty Images News | Getty Images

Oil that can be tapped quickly is a priority

Known oil reserves are increasingly valuable as European and American governments look to limit the exploration for new oil and gas reserves, according to Hiatt.

“Notably, both Pioneer and Hess possess attractive, well-established oil and gas reserves that offer the potential for significant expansion and diversification for Exxon and Chevron,” Hiatt told CNBC.

Oil and gas reserves that can be brought to market relatively quickly “are the ideal candidates for production when there is uncertainty about the pace of the energy transition,” Kah told CNBC, which explains Exxon’s acquisition of Pioneer, which gave Exxon more access to “tight oil,” or oil found in shale rock, in the Permian basin.

Shale is a kind of porous rock that can hold natural gas and oil. It’s accessed with hydraulic fracking, which involves shooting water mixed with sand into the ground to release the fossil fuel reserves held therein. Hydrocarbon reserves found in shale can be brought to market between six months and a year, where exploring for new reserves in offshore deep water can take five to seven years to tap, Jaffe told CNBC.

“Chevron and Exxon Mobil are looking to reduce their costs and lower execution risk through increasing the share of short cycle U.S. shale reserves in their portfolio,” Jaffe said. Having reserves that are easier to bring to market gives oil and gas companies increased ability to be responsive to swings in the price of oil and gas. “That flexibility is attractive in today’s volatile price climate,” Jaffe told CNBC.

Chevron’s purchase of Hess also gives Chevron access in Guyana, a country in South America, which Jaffe also says is desirable because it is “a low cost, close to home prolific production region.”

Hess CEO John Hess on Chevron deal: Strategic combination creates the premier oil and gas company

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Why merger mania is coming to the fore in the mining industry

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Why merger mania is coming to the fore in the mining industry

The Rio Tinto Group logo atop Central Park tower, which houses the company’s offices, in Perth, Australia, on Friday, Jan. 17, 2025.

Bloomberg | Bloomberg | Getty Images

The mining sector appears poised for a frantic year of dealmaking, following market speculation over a potential tie-up between industry giants Rio Tinto and Glencore.

It comes after Bloomberg News reported Thursday that British-Australian multinational Rio Tinto and Switzerland-based Glencore were in early-stage merger talks, although it was not clear whether the discussions were still live.

Separately, Reuters reported Friday that Glencore approached Rio Tinto late last year about the possibility of combining their businesses, citing a source familiar with the matter. The talks, which were said to be brief, were thought to be no longer active, the news agency reported.

Rio Tinto and Glencore both declined to comment when contacted by CNBC.

A prospective merger between Rio Tinto, the world’s second-largest miner, and Glencore, one of world’s largest coal companies, would rank as the mining industry’s largest-ever deal.

Combined, the two firms would have a market value of approximately $150 billion, leapfrogging longstanding industry leader BHP, which is worth about $127 billion.

Analysts were broadly skeptical about the merits of a Rio Tinto-Glencore merger, pointing to limited synergies, Rio Tinto’s complex dual structure and strategic divergences over coal and corporate culture as factors that pose a challenge for concluding a deal.

“I think everyone’s a bit surprised,” Maxime Kogge, equity analyst at Oddo BHF, told CNBC via telephone.

“Honestly, they have limited overlapping assets. It’s only copper where there is really some synergies and opportunity to add assets to make a bigger group,” Kogge said.

Global mining giants have been mulling the benefits of mega-mergers to shore up their position in the energy transition, particularly with demand for metals such as copper expected to skyrocket over the coming years.

A highly conductive metal, copper is projected to face shortages due to its use in powering electric vehicles, wind turbines, solar panels and energy storage systems, among other applications.

Oddo BHF’s Kogge said it is currently “really tricky” for large mining firms to bring new projects online, citing Rio Tinto’s long-delayed and controversial Resolution copper mine in the U.S. as one example.

“It’s a very promising copper project, it could be one of the largest in the world, but it is fraught with issues and somehow acquiring another company is a way to really accelerate the expansion into copper,” Kogge said.

“For me, a deal is not so attractive,” he added. “It goes against what all these groups have previously tried to do.”

What's behind the looming copper shortage

Last year, BHP made a $49 billion bid for smaller rival Anglo American, a proposal which ultimately failed due to issues with the deal’s structure.

Some analysts, including those at JPMorgan, expect another unsolicited offer for Anglo American to materialize in 2025.

M&A parlor games

The company logo adorns the side of the BHP gobal headquarters in Melbourne on February 21, 2023. – The Australian multinational, a leading producer of metallurgical coal, iron ore, nickel, copper and potash, said net profit slumped 32 percent year-on-year to 6.46 billion US dollars in the six months to December 31. (Photo by William WEST / AFP) (Photo by WILLIAM WEST/AFP via Getty Images)

William West | Afp | Getty Images

Analysts led by Ben Davis at RBC Capital Markets said it remains unclear whether talks between Rio Tinto and Glencore could result in a simple merger or require the breakup of certain parts of each company instead.

Regardless, they said the M&A parlor games that arose following merger talks between BHP and Anglo American will undoubtedly “start up again in earnest.”

“Despite Glencore once approaching Rio Tinto’s key shareholder Chinalco in July 2014 for a potential merger, it still comes as a surprise,” analysts at RBC Capital Markets said in a research note published Thursday.

BHP’s move to acquire Anglo American may have catalyzed talks between Rio Tinto and Glencore, the analysts said, with the former potentially looking to gain more copper exposure and the latter seeking an exit strategy for its large shareholders.

“We would not expect a straight merger to happen as we believe Rio shareholders would see it as favouring Glencore, but [it’s] possible there is a deal structure out there that could keep both sets of shareholders and management happy,” they added.

Copper, coal and culture

Analysts led by Wen Li at CreditSights said speculation over a Rio Tinto-Glencore merger raises questions about strategic alignment and corporate culture.

“Strategically, Rio Tinto might be interested in Glencore’s copper assets, aligning with its focus on sustainable, future-facing metals. Additionally, Glencore’s marketing business could offer synergies and expand Rio Tinto’s reach,” analysts at CreditSights said in a research note published Friday.

“However, Rio Tinto’s lack of interest in coal assets, due to recent divestments, suggests any merger would need careful structuring to avoid unwanted asset overlaps,” they added.

A mining truck carries a full load of coal at Glencore Plc operated Tweefontein coal mine on October 16, 2024 in Tweefontein, Mpumalanga Province, South Africa.

Per-anders Pettersson | Getty Images News | Getty Images

From a cultural perspective, analysts at CreditSights said Rio Tinto was known for its conservative approach and focus on stability, whereas Glencore had garnered a reputation for “constantly pushing the envelope in its operations.”

“This cultural divide might pose challenges in integration and decision-making if a merger were to proceed,” analysts at CreditSights said.

“If this materializes, it could have broader implications for mega deals in the metals [and] mining space, potentially putting BHP/Anglo American back in play,” they added.

— CNBC’s Ganesh Rao contributed to this report.

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Go West, young brand – GreenPower Motor Company sells 11 more BEAST buses

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Go West, young brand – GreenPower Motor Company sells 11 more BEAST buses

GreenPower Motor Company says it’s received three orders for 11 of its BEAST electric Type D school buses for western state school districts in Arizona, California, and Oregon.

GreenPower hasn’t made the sort of headline-grabbing promises or big-money commitments that companies like Nikola and Lion Electric have, but while those companies are floundering GPM seems to be plugging away, taking orders where it can and actually delivering buses to schools. Late last year, the company scored 11 more orders for its flagship BEAST electric school bus.

As far as these latest orders go, the breakdown is:

  • seven to Los Banos Unified School District in Los Banos, California
  • two for the Hood River County School District in Hood River, Oregon
  • two for the Casa Grande Elementary School District in Casa Grande, Arizona

Those two BEAST electric school buses for Arizona will join another 90-passenger BEAST that was delivered to Phoenix Elementary School District #1, which operates 15 schools in the center of Phoenix, late last year.

“As school districts continue to make the change from NOx emitting diesel school buses to a cleaner, healthier means of transporting students, school district transportation departments are pursuing the gold standard of the industry – the GreenPower all-electric, purpose-built (BEAST) school buses,” said Paul Start, GreenPower’s Vice President of Sales, School Bus Group. “(The) GreenPower school bus order pipeline and production schedule are both at record levels with sales projections for (2025) set to eclipse the 2024 calendar year.”

GreenPower moved into an 80,000-square-foot production facility in South Charleston, West Virigina in August 2022, and delivered its first buses to that state the following year.

Electrek’s Take

GreenPower electric school buses
BEAST and NanoBEAST; via GreenPower Motor Company.

Since the first horseless carriage companies started operating 100 years ago (give or take), at least 1,900 different companies have been formed in the US, producing over 3,000 brands of American automobiles. By the mid 1980s, that had distilled down to “the big 3.”

All of which is to say: don’t let the recent round of bankruptcies fool you – startups in the car and truck industry is business as usual, but some of these companies will stick around. If you’re wondering which ones, look to the ones that are making units, not promises.

SOURCE | IMAGES: GreenPower Motors.

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Harbinger electric truck brand gets real with $100M Series B funding raise

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Harbinger electric truck brand gets real with 0M Series B funding raise

While some recent high-profile bankruptcies have cast doubt on the EV startup space recently, medium-duty electric truck maker Harbinger got a shot of credibility this week with a massive $100 million Series B funding round co-led by Capricorn’s Technology Impact Fund.

It’s been a rough couple of weeks for fledgling EV brands like Lion Electric and Canoo, but box van builder Harbinger is bucking the trend, fueling its latest funding round with an order book of 4,690 vehicles that’s valued at nearly $500 million. Some of the company’s more notable customers including Bimbo Bakeries (which owns brands like Sara Lee, Thomas’, and Entenmann’s) and THOR Industries (Airstream, Jayco, Thor), which is also one of the investors in the Series B.

Other prominent investors include Tiger Global, the Coca-Cola System Sustainability Fund, and ArcTern Ventures.

As for what makes Harbinger such an attractive investment prospect, Dipender Saluja, Managing Partner of Capricorn Investment Group’s Technology Impact Fund explains that, “Harbinger has demonstrated a remarkable ability to reach significant milestones far quicker than other EV companies … the market has been impressed by their ability to develop large portions of the vehicle in-house to drive down unit costs, while remaining capital efficient.”

The company plans to use the funds to ramp up to higher-volume production capacity and deliver on existing orders, as well as build-out of the company’s sales, customer support, and service operations.

“Harbinger is entering a rapid growth phase where we are focused on scaling production of our customer-ready platform,” said John Harris, co-founder and CEO. “These funds catalyze significant revenue generation. We’ve developed a vehicle for a segment that is ripe for electrification, and there is a strong product/market fit that will help fuel our upward trajectory through 2025 and beyond.”

The company has raised $200 million since its inception in 2021.

SOURCE | IMAGES: Harbinger.

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