CNBC’s Jim Cramer on Wednesday said investors could expect to see more mergers and acquisitions in the energy and oil space in 2019.
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“Anadarko was the first big oil deal this year, but I bet it won’t be the last,” the “Mad Money” host said. “That’s why I like Apache, I like Concho, Parsley, and especially Pioneer Nat, because this industry still needs much more consolidation.”
Chevron made a move on Friday to purchase the oil and gas driller in a cash-and-stock deal worth $33 billion. Cramer had anticipated a merger in the energy and oil sector because the market is crowded. There could be more to come, especially since Occidental had made a competing bid for Anadarko, he said.
“Three weeks ago, I did make a called shot. I came out here and explained that this market was in dire need of mergers and acquisitions,” he said. “We’ve simply got too many publicly traded companies, something that’s only going to get worse as more and more privately held unicorns, like Pinterest tonight, keep coming public.”
Apache, a natural gas and crude oil producer, has wells in the United States, Egypt, and the North Sea near Great Britain, Cramer said. The company also has a lot of exposure to the Permian Basin, which is a large sedimentary in western Texas and southeastern New Mexico.
Apache has been an inconsistent producer, but the stock has plummeted so low — from $101 in 2014 to $25 in December — that it could have some upside, the host said. It closed at less than $37 Wednesday.
The debt-laden balance sheet is the only problem with the company, Cramer said. Still, he thinks it could worth a lot to Exxon than it is as a standalone company.
Concho Resources has become a pure play on the Permian Basin after the company made a series of acquisitions and small-scale divestitures, Cramer said. He thinks Occidental or Exxon could absorb the independent oil and natural gas company.
While Concho doesn’t appear to be interested in merging, but Cramer said they could bite for the right price.
Parsley Energy has a $6.6 billion market cap with holdings in two of the best sub-areas of the Permian Basin, the host said. The independent exploration and production company could be ready to reap the benefits of its investments, he said.
Furthermore, the stock is cheap at about $20 and selling for 9-times 2020 earnings estimates, Cramer said.
An acquisition of Pioneer Natural Resources could be just as big, if not bigger, than the Anadarko deal, Cramer said. It would depend on the size of the premium, he added.
CEO Tim Dove announced he would step down from the office in February following a disappointing quarter, a move that Cramer said he didn’t see coming. Scott Sheffield, who retired as chief in 2016, returned to turn things around.
Cramer said it would not surprise him if he put the company back in shape and later put it up for sale. Additionally, the stock didn’t rise 11% following the announcement of the Anardarko merger for no reason, he said.
“Personally, I love this company. Sheffield mad some brilliant acquisitions when oil cratered,” Cramer said. “He’s such a smart guy, fantastic negotiator. He’ll get the highest price imaginable if he does decide to sell.”
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