Finimize - 🛢 Chevron’s costly coup

What’s going on here?

Chevron’s staying fighting fit with the purchase of PDC Energy, a smaller oil and gas rival, it announced on Monday.

What does this mean?

Oil giants have been raking in the money for the past couple of years – and Chevron, with a $16 billion pile of cash at the end of last quarter, has channeled its inner spendthrift. The firm bagged PDC Energy in a deal worth $8 billion, overshooting the smaller company’s pre-deal value by over 10%. In the long run, that could turn out to be a bargain: this move will boost Chevron’s shale holdings in Colorado and West Texas, adding an estimated 10% to the firm’s proven reserves. And it’s expected to make Chevron’s cash register sing to the tune of an extra $1 billion a year too.

Why should I care?

The bigger picture: Oilfield minefield.

With several other oil giants bathing in their own Scrooge McDuck-like pools of cash, the stage seems set for a full-blown takeover bonanza. In fact, McKinsey thinks that North America could witness up to $230 billion worth of oil and gas deals this year. And the Permian Basin – the biggest oilfield in the US – could serve as the prime hunting ground. That’s not necessarily good news for us regular folk, though: companies often secure drilling sites there for use down the line – so these acquisitions could limit supply in the meantime, boosting prices and squeezing consumers even tighter.

For markets: The kiss of debt.

If the International Energy Agency is right, then an oil shortage might strike in the second half of this year – kickstarting a profit-producing fiesta for oil companies. But every party has a pooper (or something like that), and this time it’s the US debt ceiling. After all, the oil market can only get so hot with the prospect of defaulting (and in turn, a downturn) threatening to rain on its parade.

What’s going on here?

China took a shot at Micron over the weekend, the latest skirmish in the US-China chip war.

What does this mean?

China’s had a chip on its shoulder ever since the US threw a wrench in its ability to source some of the world's most cutting-edge processors. And the fact that a bunch of other nations took a leaf out of America’s book – bringing in tough export controls of their own – has only fanned the flames of the Middle Kingdom’s ire. So it’s not exactly a shock the country’s seeking sweet revenge. After a seven-week investigation, the Cyberspace Administration of China announced that products made by Micron – the biggest memory-chip manufacturer in the US – pose serious security risks. That’s seen China take its first real step against an American chipmaker, banning operators of critical infrastructure from buying Micron’s products.

Why should I care?

Zooming in: The chip has sailed.

Micron’s fortunes seem to hang on China’s definition of “critical information infrastructure” – but if the country’s buyers play it safe and ditch Micron en masse, this move could seriously hurt. After all, some estimates suggest that China and Hong Kong accounted for up to a quarter of Micron’s sales last year, so it’s no wonder its stock took a nosedive when the news broke. Still, it’s an ill wind that blows nobody any good, and this development probably has the firm’s rivals – like Samsung, SK Hynix, and the Chinese firm SMIC – rubbing their hands in glee.

The bigger picture: Dreaming of détente.

Newsflash, US chipmakers – you’re no longer guaranteed a warm welcome in the world’s biggest chip market. That read-my-lips statement from China will have fellow American titans like Broadcom and Intel hoping that Biden’s right: the president’s now predicting a thaw in the two countries’ relations before long, after China’s alleged spy balloon saw them grow very frosty indeed in recent times.