Mergers and acquisitions in the U.S. oil and gas sector tripled last year despite softer commodity prices as energy companies boosted spending to improve efficiency and profits, according to a report released on Tuesday.
WHY IT’S IMPORTANT
The jump in dealmaking marks a shift in strategy after years of focusing on shareholder returns over growth as commodity prices retreated from their 2022 high.
CONTEXT
The sector-wide consolidation has been led by a handful of megadeals by large players, including Exxon Mobil, Diamondback Energy and ConocoPhillips.
KEY QUOTE
Companies flush with cash were focused on driving efficiency through scale, said Bruce On, partner at EY’s strategy and energy transactions group.
“It’s a relook at process, tools, workforce and everything around your operations,” On said.
BY THE NUMBERS
Leading energy companies spent $206.6 billion on mergers and acquisitions in 2024, up from $47.9 billion the previous year, according to an Ernst & Young study published on Tuesday.
Oil and gas companies cut spending on dividends and share repurchase payments by about 25% last year to $29.2 billion.
Money spent on tapping oil and gas also fell slightly, with exploration and development expenditure down 7% year on year at $85.5 billion.
Profits fell 10% last year to $74.8 billion, less than half the record level recorded in 2022, primarily owing to soft commodity prices, the report said.
Exxon Mobil was the biggest buyer in 2024 with total property acquisition costs of $84.5 billion. The company announced the acquisition of U.S. shale oil producer Pioneer Natural Resources in October 2023 and completed the $60 billion purchase last May.
(Reporting by Nicole Jao Editing by David Goodman)