Why Chevron Stock Wilted on Wednesday

What happened

The latest mega-deal in the U.S. oil and gas industry left Chevron (CVX -3.27%) on the sidelines, with investors trading out of its stock. The company’s shares fell by over 3% on the day which, interestingly, more or less matched the performance of the peer that was behind the deal. Meanwhile, the benchmark S&P 500 index inched higher on the day, rising by 0.4%.

So what

Before market open, said rival, ExxonMobil, announced it is acquiring fracking specialist Pioneer Natural Resources in an all-stock transaction with a price tag of just under $60 billion. 

For that very considerable price, Exxon will dramatically increase its footprint in the Permian Basin region in the Southwest U.S. — Pioneer controls over 850,000 net acres, and Exxon’s current tally is around 570,000 net acres. Permian, by the way, is the largest oil field in the country. 

In its press release touting the deal, Exxon quoted its CEO Darren Woods as saying that “The combined capabilities of our two companies will provide long-term value creation well in excess of what either company is capable of doing on a stand-alone basis.”

Now what

That isn’t exactly music to the ears of Chevron investors. The oil business continues to experience a boom, thus now is a good time to expand operations (although, as we see with the Exxon/Pioneer arrangement, this isn’t exactly a cheap endeavor). It seems that the market might be punishing Chevron for being the company that didn’t make the big move today.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Chevron and Pioneer Natural Resources. The Motley Fool has a disclosure policy.

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