Sparks: Big Oil’s dealmaking frenzy; OpenAI and NewsCorp partner ⚡️

News · 31 May 2024Tiarnán McCartney

Welcome to Sparks, your weekly breakdown of some of the most interesting market news.

Here’s what sparked our interest this week:

  • Big Oil is on a roll
  • OpenAI signs another media deal
  • Apple’s sales bounce back in China

Deal with it 🔥

Where there’s smoke, there’s fire — and where there’s oil, there’s money.

While bullish $100 crude oil predictions haven't exactly panned out, dealmaking in the industry is alive and well. ConocoPhillips announced this week it's buying Marathon Oil in an all-stock deal. This comes hot on the heels of Hess shareholders recently approving a $53 billion takeover from Chevron. Despite regulatory scrutiny and market volatility, US oil giants are flexing their financial muscles, and might intend using recent years’ bumper profits to snap up smaller drillers in the Permian Basin and in the Gulf of Mexico.

Last year saw a massive $250 billion M&A activity in the oil industry, including Exxon Mobil’s$59.5 billion purchase of Pioneer Natural Resources (which the FTC approved earlier this month). However, the Exxon-Chevron-Hess drama is far from over, with Exxon contesting the Chevron-Hess deal over Guyana oil rights ‌ — ‌ a dispute that might not be resolved until next year.

On the climate front, tensions between Big Oil and activists continue to heat up. Activist efforts to push for greener policies are facing hurdles, with shareholders at Shelloverwhelmingly rejecting a climate resolution last week. Exxon is even suing activist groups over emissions targets, saying their proposals reflected “an extreme agenda”.

The numbers

  • $17 billion — The value of ConocoPhillips' all-stock deal to acquire Marathon Oil
  • Approx. $250 billion — Total value of oil sector M&A activity in 2023
  • $53 billion — The value of Chevron's takeover of Hess

Read all about it 🗞️

Heard the news? Wall Street Journal owner News Corp has partnered with Microsoft-backed AI giant OpenAI in a content-licensing agreement that’s said to potentially be worth over $250 million over five years. This deal allows OpenAI to use articles from News Corp’s publications, like the WSJ and the New York Post, to answer user questions and train its AI systems.

News Corp CEO Robert Thomson hailed the agreement, stating: “The pact acknowledges that there is a premium for premium journalism”. Following the announcement, News Corp’s shares jumped 7.1% in after-hours trading.

This isn’t OpenAI’s first rodeo — they've also struck similar deals with Axel Springer and the Associated Press. These deals reflect a developing relationship between print media, creators, and generative AI. However, not all publishers are on board‌ — ‌The New York Times and eight other US daily newspapers owned by Alden Global Capital have sued OpenAI over copyright complaints. Many outlets have also blocked their sites from being crawled for AI training.

Just like the printing press, the television, and social media changed the face of information distribution in days gone by, AI is poised to reshape things for the here and now.

In other news 🤓

Some other sparks that have been flying this week:

  • The race is on — The TikTok saga continues to unfold as a US appeals court has set a speedy schedule to review challenges to a new law requiring ByteDance, TikTok's parent company based in China, to sell its US assets by 19 January 2025, or risk being banned. This law, quickly passed by Congress, stops Apple and Google from offering TikTok on their app stores and prevents internet hosting services from supporting the app unless ByteDance complies with the divestment. The call for divestment arises from concerns among US lawmakers about potential Chinese access to American data and espionage. TikTok and the Justice Department aim for a ruling by 6 December 2024.
  • Comeback kid — Apple's iPhone made a remarkable comeback in China last month, with shipments soaring by 52%. This surge in sales comes amidst a wave of discounts offered by retail partners. Out of all smartphone shipments, about 3.5 million units came from foreign brands, with the iPhone leading the pack. This turnaround follows growth in March 2024 after facing notable declines earlier in the year. Previously, Apple had experienced double-digit drops in sales for its latest models, losing market share to rivals like Huawei Technologies Co.
  • Grok, stock, and two smokin’ barrels Elon Musk's xAI just got a $6 billion boost for its AI development, backed by venture capital heavyweights like Andreessen Horowitz and Sequoia Capital. Musk flaunted xAI's pre-investment valuation at $18 billion on his social media site X, and is likely gearing up to take on Microsoft and OpenAI (which he cofounded, and later sued). Meanwhile, Tesla shareholders are facing a tough decision, urged by Glass Lewis to push back against Musk's eye-watering $56 billion compensation package. It's all set to go down on 13 June 2024.

Next week 🗓️

Earnings reports are expected from AlphabetWalmart, and Netflix.

That’s all for this week!

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