Shale producers follow up on mergers, acquisitions amid industry shifts
Date
8/19/2024 9:23:38 AM
(MENAFN) In the evolving landscape of the oil and gas sector, smaller shale producers are actively pursuing mergers and acquisitions, even as major players like Exxon Mobil Corp. and Chevron Corp. take a more measured approach following a period of significant deal-making. The robust demand for oil, combined with prices stabilizing around USD80 per barrel, is expected to sustain strong M&A activity in the sector, potentially leading to even larger deals.
Over the past year, the largest U.S. oil companies have engaged in a flurry of acquisitions, driven by investor pressure to reduce exploration expenditures and cut costs while maintaining profitability in an industry facing fluctuating public sentiment. These major companies have seized opportunities to enhance their production capabilities and inventory by acquiring smaller competitors. According to Conrad Gibbons, managing director at Jefferies Financial Group, the challenge of growing reserves organically has made acquiring smaller firms at higher costs an appealing strategy.
Globally, oil and gas companies completed USD265 billion in mergers and acquisitions in the year ending June 30, with significant transactions including Exxon’s USD60 billion acquisition of Pioneer Natural Resources and Chevron’s USD53 billion purchase of Hess, although the latter faced arbitration issues. Prior to this surge, quarterly M&A activity was about USD30 billion, reflecting a significant increase from the 2018 average.
As Exxon Mobil anticipates a decline in refining profits due to shrinking margins industry-wide, smaller producers are also making strategic moves. Devon Energy Inc., for instance, acquired Grayson Mill Energy for USD5 billion, expanding its foothold in the Bakken Basin, while Permian Resources Inc. purchased a segment of the Delaware Basin from Occidental Petroleum for over USD800 million. These transactions, while not as high-profile as those of the larger firms, underscore the ongoing consolidation within the sector.
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