U.S. oil and gas mergers and acquisitions continued at a breakneck pace in the second quarter of 2024, with deals surpassing $30 billion. Major tie-ups, such as ConocoPhillips’ $22.5 billion offer for Marathon Oil, have significantly boosted activity, according to data released by energy researcher Enverus.
Blockbuster mergers, including Exxon Mobil’s $60 billion bid for Pioneer Natural, have set off a wave of consolidation across the U.S. energy sector. This trend has extended from Texas and North Dakota oil producers to energy pipeline operators.
Record-Breaking Transactions and Market Dynamics
There were 18 oil and gas production mergers with disclosed prices totaling $30.29 billion in Q2, up from 25 deals valued at $24.4 billion in the same quarter last year, noted Andrew Dittmar, Enverus’ head of M&A research. Although the value of deals dipped from a record $51 billion in Q1, the market remains robust.
“Pressure built on companies like ConocoPhillips and Devon Energy to keep pace with peers and grow in scale,” Dittmar said. Conoco’s proposed acquisition of Marathon Oil constituted the majority of last quarter’s deal total. Additionally, Devon Energy reinforced the merger frenzy with a $5 billion bid for shale oil producer Grayson Mills.
The average price per undeveloped drilling location in this year’s deals climbed to $3.2 million, a significant increase from the $1.9 million average in 2023, Enverus data showed.
Regulatory Scrutiny and Future Prospects
Despite the surge in mergers, U.S. lawmakers have urged regulators to slow down merger approvals. However, the Federal Trade Commission (FTC) has not halted any recent oil mergers but is reviewing several, including deals involving ConocoPhillips, Chevron, Occidental Petroleum, Chesapeake Energy, and Diamondback Energy.
Among the notable second-quarter deals, SM Energy agreed to buy XCL Resources for $2.55 billion, Crescent Energy bid $2.1 billion for SilverBow Resources, and Matador Resources offered $1.9 billion for Ameredev II.
The market has also seen a shift in investment dynamics. Deals priced at less than $1 billion have been squeezed by a lack of capital and shifting investment goals among private equity investors, according to M&A advisory firm Petrie Partners.
The ongoing consolidation reflects a strategic shift among major oil companies to expand their portfolios and enhance operational efficiencies. The substantial sums being paid for undeveloped properties indicate a strong belief in the long-term value of these assets, despite the significant investments required to bring them into production.
Industry Outlook
The U.S. oil and gas sector is poised for continued mergers and acquisitions as companies seek to position themselves favorably in a competitive market. The current trend underscores the importance of scale and resource optimization in the industry’s growth strategy.
As the second half of 2024 unfolds, market observers anticipate further consolidation, driven by both strategic imperatives and market opportunities. The ongoing review by the FTC will be a critical factor in shaping the future landscape of the U.S. oil and gas industry.
Source: Reuters
