Two companies in the state of North Dakota have announced plans to merge to better take advantage of the price rally. Confirming a deal leaked by business newspaper Wall Street Journal (WSJ) a day earlier, rival North Dakota shale drillers Oasis Petroleum and Whiting Petroleum said on Mar. 7 they had agreed to form a combined company valued at $6 billion including debt.

The transaction is expected to close in the second half of this year, with the new company to be based in the US oil and petrochemicals capital of Houston, Texas. Whiting’s president and CEO Lynn Peterson will become executive chairman of the board, while Oasis CEO Danny Brown will serve as CEO and will join the board.

Both firms, which had filed for Chapter 11 bankruptcy protection after oil prices collapsed in 2020, have spent the interim streamlining their holdings to benefit from the new upward momentum, WSJ said.

In 2021, Oasis bought assets in the Bakken shale region from Diamondback Energy for nearly $750 million while selling its holdings in the Permian Basin of West Texas and New Mexico for more than $400 million. At the same time, Whiting divested leasehold interests and other assets in the DJ Basin in Colorado and acquired more assets in the Bakken region.

Beyond skyrocketing energy prices at home, many US investors in shale are eyeing at the profit potential that could arise from Europe’s gas shortfall with the apparent scrubbing of the Nord Stream 2 pipeline connecting Russia with Germany.

An end to Nord Stream pipe dreams?

European leaders in the past turned deaf ears to former US president Donald Trump’s urging them to import LNG from the overflowing US shale pool and kill the Russian gas deal while environmental NGOs also frowned on the idea of more fossil fuel-burning ships transporting more fossil fuels across the Atlantic. In the wake of the Ukraine conflict, however, the picture has completely changed.

Germany’s national chambers of industry and commerce, DIHK, has estimated that to compensate for lost Russian gas – in particular if either side withdraws from the first pipeline, Nord Stream 1 – the country could conceivably require the equivalent of deliveries from the world’s entire 600-vessel fleet of LNG tankers.

Chancellor Olaf Scholz has announced plans to fast-track construction of what would be Germany’s first-ever LNG terminals but completion could take years. According to news agencies, Berlin has authorized a €1.5 billion ad hoc payment to secure the liquefied gas. At current prices, this is equivalent to about week’s supply, Bloomberg estimated, adding that LNG is typically at least 10% more expensive than Russian pipeline gas.

Even before the Russian invasion, European demand for American-made LNG was driving US gas exports. In mid-February, citing Refinitiv vessel tracking data, Reuters said Europe was poised to remain the top export destination for the third consecutive month.  

Author: Dede Williams, Freelance Journalist