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A report released on Monday shows that mergers and acquisitions within the U.S. Oil and Gas sector tripled in 2013 despite lower commodity prices. This was due to energy companies increasing spending to increase efficiency and profits.
Why it’s important
The sudden increase in dealmaking is a sign of a strategic shift after years spent focusing on shareholder return over growth, as commodity prices fell from their high in 2022.
CONTEXT
Exxon Mobil and Diamondback Energy, as well as ConocoPhillips, have led the consolidation of the sector.
KEY QUOTE
Bruce On, partner in EY’s Strategy and Energy Transactions Group, says that companies flush with cash are focused on maximizing efficiency by leveraging scale.
On explained that the process, tools and workforce must be re-evaluated.
By the Numbers
According to a study by Ernst & Young published on Tuesday, leading energy companies will spend $206.6 billion in mergers and acquisitions between 2024 and 2026, compared with $47.9 Billion the year before.
Last year, oil and gas companies reduced their dividend payments and share repurchases by around 25% to $29.2 Billion.
Exploration and development costs fell 7% on an annual basis, to $85.5 billion.
The report stated that profits fell 10% to $74.8 billion last year, which is less than half of the record-breaking level in 2022. This was primarily due to low commodity prices.
Exxon Mobil, with a total acquisition cost of $84.5 billion in 2024, was the largest buyer. The company announced its acquisition of U.S. oil producer Pioneer Natural Resources, which was worth $60 billion in May last year. (Reporting and editing by David Goodman.)
(source: Reuters)
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