Shares of energy companies rose amid deal speculation.
Exxon CEO Darren Woods and Chevron chief Mike Wirth discussed the megadeal after the start of the coronavirus outbreak that put both companies under massive financial pressure and drove oil prices to historic lows, The Wall Street Journal reported Sunday. Together, they would likely form the world's second largest oil company by market capitalization and production-producing about 7 million barrels of oil and gas a day, based on pre-pandemic levels-behind only Saudi Aramco in both measures.
The U.S. economy has a long way to go before it fully recovers and will need strong support from the Federal Reserve and the broader government to get there, said Federal Reserve Bank of Minneapolis President Neel Kashkari, adding that he wasn't concerned about the wave of speculation on the stock market. Both companies trace their lineage back to the mighty Standard Oil, the monopolistic oil producer run by John D. Rockefeller, which was broken up by the US government. Oil prices have rebounded this year after a brutal spring 2020 in which United States crude fell into negative territory for the first time. Late past year, the second-largest USA oil producer took steps to reduce costs and streamline operations.
Exxon and Chevron have market capitalizations of $190 billion and $164 billion, respectively.
That's one reason why a merger between the two US oil giants makes sense, industry analyst Paul Sankey at Sankey Research wrote in an October note to clients.
Last year's Saudi-Russian oil price war, for instance, highlighted the vulnerability of US producers to foreign governments that can effectively dictate the price of crude by forcing energy companies they back to boost or cut output. Last week the company reported a fourth quarter loss.
Exxon and Chevron, with their powerful balance sheets, withstood turmoil in energy markets following the pandemic that forced some smaller independent oil and gas producers to file for bankruptcy protection.
The agency - one of the three most influential ratings firms in the world - said it could ultimately downgrade the ratings of Chevron, Exxon, Shell and Total among others.