From the Wall Street Journal:
Chevron Cash Fuels Deal Talk
Chevron Corp. CVX +0.70% is hoarding the money it makes from oil and gas operations, prompting investors to wonder if the energy giant is bracing for a spike in costs or will use its $21 billion cash pile to buy a smaller rival.
The company's cash level rose 60% over the last year. Chevron is now carrying more cash on its balance sheet than any publicly traded energy company—about 18% more than larger rival Exxon Mobil Corp. XOM +0.43% —and more than the market capitalization of most U.S. exploration companies. Even if Chevron used the money to retire all its debt, it would still have about $11 billion left over....
..."I wouldn't be surprised if [Chevron] took a look at companies trading at a substantial discount," said Allen Good, a Morningstar Inc. analyst.
Cash-strapped Chesapeake Energy Corp., CHK +0.16% the nation's second-largest gas producer after Exxon, has been discussed as an acquisition target since its largest shareholders—who now effectively control the board—urged its management in May to consider a sale at a rich enough premium.
Chesapeake's $12.7 billion stock-market value makes its vast oil and gas holdings look cheap. But some experts say its complicated web of financings—and the discount on its stock price, which could hinder agreement on a deal value—make an acquisition less likely....MORE