Exxon and Chevron Discussed Merger in 2020; May Resume Talks

Were the two corporations to become one, their combined worth of $350 billion would make it the biggest corporate merger so far

Recent media reports have revealed that Chevron and ExxonMobil began exploring the possibility of merging during

the early months of the pandemic. Although talks were eventually discontinued, they are indicative of the intense pressure the oil and gas industry has been battling. Shares of both corporations nosedived during the Saudi-Russian oil price war, and extended lockdowns dramatically shook up crude oil prices. Exxon faced tough questions from investors unsure about the company’s long-term profitability. It has been under strong directives from hedge funds and investment firms to improve dividends and invest in clean energy. Foreign currency effects, low margins on fuel and expensive acquisitions led Chevron to report an $11 million loss for the fourth straight quarter. Both Exxon and Chevron have cut jobs over the past year.

An oil facility in Wyoming, USA. Credit: ExxonMobil website

Although both companies have declined to comment, sources reported that the two discussed strategies to weather an unpredictable energy market by major cost-cutting. Discussions were critical enough to merit drawing up legal documentation on certain aspects. Sources have indicated that in the near future, discussions might be resumed.

If the merger were to take place, it would possibly be the largest corporate association so far. With Exxon’s worth pegged at $190 billion and Chevron’s at $164 billion, their $350 billion merger would be eclipsed only by Saudi Aramco which has a market value of $1.8 trillion. Both companies are the two largest descendants of the Rockefeller Standard Oil monopoly, which was broken up by regulators in 1911. And this possible merger would also invite intense scrutiny from America’s anti-competition regulators.

On the other hand, it is possibly America’s best approach to compete with Saudi Aramco and other state-owned oil producers around the world. While smaller, independent gas producers shut shop and filed for bankruptcy due to the pandemic, Exxon and Chevron managed to weather the storm. Speaking generally about mergers, Chevron CEO and Chairperson Michael Wirth said to the Wall Street Journal: “As for larger-scale things, it has happened before. Time will tell.”