One of the many methods large companies stay large is to buy smaller companies particularly when they have assets which offer profits for generations to come. The larger companies can afford to pay a healthy premium and the owners of the smaller company will typically convert some of their shares into owning a piece of the larger company. It is easier to see the process in the commodities or natural resources sector. In the tech sector, companies are buying talent.

In an article by Michelle Chapman of the Associated Press, in the oil industry, one of the biggest discoveries of oil is off the coast of Guyana. The country will soon be the 4th largest offshore oil producer in the world being ahead of Qatar, the US, Mexico and Norway.

In the world of offshore drilling, because of the expense and risk, companies often partner up and fight for the best blocks. Three companies of Exxon, China’s CNOCC and Hess have squared off in a heated competition for the lucrative oil fields in northern South America,

Chevron was late to the party, decided to buy Hess for $53 billion in October of 2023. With the ruling, Mr. Hess (also owner of the New York Jets football team) joins the board of directors of Chevron.

Exxon sued Chevron at the International Chamber of Commerce in Paris, France which Chevron won. Exxon said they disagree with the ICC panel’s interpretation but respect the arbitration and dispute resolution process.

Linking to dividend paying stocks, in the world of natural resources, all the players know each other, they serve on many industry associations, but they are competitive in the marketplace, particularly with trophy assets. A trophy asset means a license to print money, if the asset is well managed. Often smaller companies find the assets, but it costs a great deal of money to develop the asset and for that the larger companies are needed. When the company you own has a trophy investment, all you have to do is determine if the asset is well managed and will continue to produce profits for the company otherwise it is time to find alternatives.

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