The Daily Chase: Major oil deal

Here are five things you need to know this morning.

Major oil merger: There’s a major development in the energy sector on Monday morning, as Texas based Diamondback Energy has offered $26 billion to buy the largest privately held oil and gas producer in the Permian Basin, Endeavor Energy Resources. The move would catapult Diamondback into the #3 spot in the Permian behind multinationals Exxon and Chevron, and is a major bet that the shale boom built around the Permian has several more years and decades to run. The move comes after Exxon spent $60 billion to buy up Pioneer in the same area, and is only the latest bout of consolidation in the oil sector that is roping in Canadian names. On Friday, Oklahoma-based oil and gas firm Devon Energy is in talks to acquired Calgary-based driller Enerplus Corp. While Enerplus isn’t much of a presence in the Permian, it is a major player in the Bakken shale basin of North Dakota and the Marcellus region in Pennsylvania. While there’s still no confirmation of a deal, Enerplus shares jumped 10 per cent on the news and have stayed there. It will be interesting to watch if consolidation in the energy sector keeps on going.

Fairfax pushes back: Fairfax Financial was targeted by short seller Muddy Water last week, and while the TSX-listed company pushed back against the allegations it was overvalued initially, the company spent the weekend reading over all 72 of Carson Block’s allegations and has come out with something a lot more full-throated on Monday morning. “We categorically deny and refute all of them, without exception, as false and misleading,” Fairfax said. The company’s statement on Monday says that instead of coming to the company directly or asking it questions via usual means, Muddy Waters chose to use the media to get its message out. “They may have successfully done this with other companies, but they have woefully misjudged the strength of Fairfax’s financials and prospects and we are confident the marketplace will reflect our strong fundamentals,” Fairfax said. The company’s shares fell almost 12 per cent on Thursday the day the short report came out, and while they rebounded a little on Friday and are poised to do so again on Monday, the whole saga makes the company’s next earnings report, scheduled for Friday of this week, a must-read. So, we will.

U.S inflation in the spotlight: We won’t get the number until tomorrow but the biggest item on the economic calendar this week is the release of the latest inflation or Consumer Price Index numbers out of the U.S. on Tuesday. The inflation rate finished 2023 at 3.4 per cent, well down from the peak of more than 9 per cent it hit in the summer of 2022, but still higher than central bank policymakers would like to see.  Economists expect the number to drop to something that might even start with a 2, which would be good news for consumers and investors who have spent much of the past few months waiting for central bankers to start cutting interest rates. A number solidly below 3 might be enough to move up the timelines of rate cuts, or at least increase the likelihood that we’ll start seeing them later this year. Currently the market is betting there’s about a 1 in 5 chance of a cut as early as March, rising to “almost certainly” by June, but a weak inflation number on Tuesday could change things.