In most industries particularly in commodities, bigger is better for efficiencies and profitability. In the domestic oil industry, Exxon bought Pioneer Natural, Chevron bought Hess Oil, Occidental Petroleum is buying CrownRock and the list goes on. While investors typically focus on the Europe and US, there are other countries with significant oil and gas companies, including Australia.

In an article by Scott Murdoch, Emily Chow and Lewis Jackson of Reuters, two of the largest oil and gas companies wish to combine to be larger. If the deal is completed, the biggest liquefied natural gas(LNG) producer in Australia, the world’s no. 2 exporter of the super chilled fuel that is expected to see decades of growth to meet Asia’s energy transition needs.

Woodside is headquartered in Perth, Australia and has a market capitalization of 56.91 Australian dollars, while Santos is headquartered in Adelaide is valued at 22.1 Australian dollars.

The two companies would have 260 million barrels of oil production, while the total production plus probable reserves at 5.39 million BOE. In turns of LNG sales would be expected to be 60 million tonnes.

Jun Bei Liu, a Tribeca Alpha Fund portfolio manager who owns shares in both companies said in today’s world oil is almost done so you need to get scale and generate as much profit as possible to invest for the energy transition.

Linking to dividend paying stocks, the world economy changes over time and to meet the classic supply and demand companies have to change. What has profitable at scale changes and sometimes to maintain margins, the companies need to consider and do mergers. The industry can still be and is profitable but the number of players changes, it is neither good nor bad, it just is.

There are more questions than answers, till the next time – to raising questions.