Mergers and acquisitions in the U.S. oil and gas sector surged in 2024, more than quadrupling from the previous year despite a weaker commodity price environment. According to an Ernst & Young report released Tuesday, leading energy companies shifted their strategies to prioritize scale, efficiency, and long-term profitability.
After years of maintaining a conservative focus on shareholder returns, many operators redirected capital into acquisitions. This pivot reflects a broader recalibration across the industry as producers look to stabilize revenue streams in a market still grappling with price volatility.
The Push for Efficiency Through Consolidation
The dramatic increase in dealmaking underscores the degree to which consolidation has become the central playbook for oil and gas companies. A handful of megadeals, spearheaded by Exxon Mobil, Diamondback Energy, and ConocoPhillips, accounted for much of the sector’s record transaction value.
Bruce On, a partner in EY’s strategy and energy transactions group, noted that the acquisitions were about more than just expanding acreage. “It’s a relook at process, tools, workforce and everything around your operations,” On said, pointing to how companies are leveraging consolidation to streamline processes and maximize efficiency.
With balance sheets strengthened by prior years of high prices, many producers entered 2024 flush with cash. Rather than channeling that liquidity solely into dividends or share buybacks, firms used their financial strength to position themselves for sustainable growth.
The strategy was clear: scale now provides not only greater resource exposure but also operational leverage that can drive down costs. Larger companies are better equipped to absorb commodity price swings, invest in advanced technology, and maintain competitive drilling programs.
By the Numbers: A Record Year of Dealmaking
EY’s study showed that U.S. oil and gas companies spent $206.6 billion on mergers and acquisitions in 2024, a staggering jump from $47.9 billion the year prior. Exxon Mobil alone accounted for $84.5 billion of this total, driven largely by its $60 billion acquisition of Pioneer Natural Resources, finalized in May 2024.
At the same time, companies dialed back capital deployment in other areas. Dividend and share repurchase payments declined 25 percent to $29.2 billion. Exploration and development expenditures slipped 7 percent year over year to $85.5 billion, reflecting a cautious approach to drilling amid lower commodity prices.
Profits across the sector also fell, dropping 10 percent to $74.8 billion in 2024. That figure is less than half the record profits of 2022, when oil and gas prices spiked to multi-year highs. The earnings downturn highlighted why many firms favored acquisitions over organic growth, using deals as a hedge against market softness.
While the sector has historically cycled between expansion and retrenchment, the 2024 wave of consolidation marked a clear break from recent years. Companies that once focused almost exclusively on rewarding investors through cash distributions are now banking on scale to sustain future returns.
Implications for 2025 and Beyond
The consolidation trend has several implications for the year ahead. First, it signals that U.S. shale production is maturing. With fewer high-quality drilling locations available, companies are choosing to buy rather than build. Acquiring rivals provides immediate access to proven assets and synergies that are difficult to replicate organically.
Second, the shift away from outsized shareholder distributions suggests that capital discipline remains, but with a new emphasis on strategic deployment. Firms are balancing investor payouts with investments that can deliver long-term resilience.
Finally, the emphasis on efficiency reflects growing recognition that profitability in a lower-price environment requires more than just scale. It requires integration of assets, standardization of operations, and optimization of technology and workforce.
As commodity markets continue to fluctuate, the U.S. oil and gas sector is positioning itself for a new phase of consolidation-led growth. The megadeals of 2024 have set the stage for what could become a defining strategy of the decade: fewer, larger, and more efficient operators shaping the competitive landscape of American energy.
