Surging to New Heights: Record $192 Billion M&A Activity Reshapes US Oil & Gas Industry in 2023

Despite the record-breaking M&A values in 2023, future activity is expected to evolve in the changing energy landscape and oil markets.

The US oil and natural gas industry experienced a historic surge in mergers and acquisitions (M&A) activity in 2023, with a record-setting total value of $192 billion. This was more than a threefold increase compared to the previous year, with $144 billion of the total occurring in the fourth quarter alone. This unprecedented level of energy deal-making was driven by major transactions, including ExxonMobil’s $65 billion acquisition of Pioneer Natural Resources and Chevron’s purchase of Hess for $60 billion.

This wave of consolidation is seen as a strategic move by oil and gas companies to replace declining shale reserves and secure their future in a competitive market. The Permian Basin, spanning West Texas and New Mexico, was a hot spot for these transactions, accounting for $103 billion in deals due to its high-quality drilling opportunities and potential for resource expansion. The basin saw significant deals such as Exxon’s acquisition of Pioneer and Occidental Petroleum’s $12 billion purchase of CrownRock.

Despite the flurry of activity in 2023, Enverus Senior Vice President Andrew Dittmar expressed doubts about a repeat performance in 2024. The pool of appealing takeover targets is diminishing, which could slow down the pace of such large-scale deals. However, with the growing focus on liquified natural gas (LNG) exports, there may be increased interest in gas-centric acquisitions in the coming years.

The Permian Basin remains a key focus for buyers aiming to increase their footprint in fossil fuel operations, but with many potential buyout opportunities already utilized, companies might begin exploring international acquisition opportunities or smaller, asset-sized transactions in different plays.

Overall, the year 2023 marked a significant phase of consolidation in the US oil and gas industry, setting records in M&A value and indicating a strategic shift in how companies are planning for their future in an evolving energy landscape​​.

Historical Trends in Oil and Gas M&A Activity (2013-2023)

The oil and gas industry has seen significant fluctuations in mergers and acquisitions (M&A) activity over the past decade, influenced by various economic, geopolitical, and technological factors. Here’s a look at the trends:

2013-2019: Variable Activity Amid Market Challenges

➡. The period from 2013 to 2019 was characterized by varying levels of M&A activity. In 2019, while the total deal value increased by 40% to $370 billion, mainly due to several mega-deals in upstream and downstream sectors, the overall deal count declined by 40% year-over-year (YOY). This decline was attributed to challenges like low commodity prices and difficult market conditions​.

➡. Upstream deal values totaled $156 billion in 2019, with the U.S. being the hub for these activities. The midstream sector also saw a significant increase in both deal count and value. Downstream deals reached a decade-high of $114 billion, while oilfield services (OFS) deal values declined​.

2020-2022: Pandemic Impact and Energy Transition

➡. The COVID-19 pandemic in 2020 resulted in reduced M&A activity in the oil and gas sector, with several deals stalling or being canceled. Companies were cautious due to the economic uncertainty and lower demand caused by the pandemic​.

➡. The focus shifted towards energy transition, with increasing investments in clean energy solutions and low-carbon O&G development. This transition was driven partly by societal and regulatory pressures and partly by strategic shifts within the industry​​​.

In summary, the past decade in the oil and gas industry’s M&A activity highlights a shift from growth and market share acquisitions to strategic consolidations focused on energy transition and operational efficiency. Despite the record-breaking M&A values in 2023, future activities are expected to evolve with the changing energy landscape and market conditions.

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