Ever since shale drilling began in Texas twenty years ago, we've known that only players with sufficient scale will potentially be able to thrive in the Permian Basin - as has yet to be proven over time.

Among those who survived the last downturn and avoided bankruptcy, the smaller producers have almost all disappeared or been bought out. With the current round of consolidation, mid-sized producers are heading in the same direction.

In the wake of Exxon's $64 billion takeover of Pioneer and Chevron's $60 billion takeover of Hess, Occidental announced forty-eight hours ago that it would be acquiring CrownRock for $12 billion. The deal leaves Occidental as a challenger to the two behemoths.

This forces the group to pay the bill in cash rather than in shares, unlike Exxon and Chevron. To do so, it will have to take on an additional $10 billion in debt, which will of course bring back some painful memories for its historic shareholders.

Indeed, in 2019, convinced that the worst was behind, Occidental took on massive debt to complete its acquisition of Anadarko. This was just before the pandemic hit and the price of oil fell even further. It took Berkshire Hathaway's intervention to avert the worst.

To those who point out the troubling parallel, Occidental is now an incomparably larger and better-integrated group than it was at the time. In addition, the two transactions are very different: In 2019, Occidental paid $55 billion to buy Anadarko.

Four years ago, Occidental had really "bet the farm" on a transformative acquisition. Now, as 2023 draws to a close, it is content to tuck its Texan preserve a little further in.

It is true, however, that the group paid full price for CrownRock. Earlier this year, with oil and gas prices still at high levels, the sale of the latter was envisaged at valuation levels 20% to 30% lower than the amount paid by Occidental two days ago.

Without a rapid recovery in crude oil prices, it will be difficult to make the operation profitable. This situation has prompted critics to point out that Occidental was undoubtedly caught out by the famous FOMO syndrome - "Fear Of Missing Out".

Occidental has already promised rapid deleveraging through asset disposals, and speculation is rife as to which ones. On the face of it, it won't be anything in Texas or related to OxyChem's lucrative refinery-chemicals business, so we're betting on offshore assets in the Gulf of Mexico, or "unconventional" onshore assets in Colorado.