The oil and gas industry is on track for another record year of mergers and acquisitions (M&A) deals. In contrast to the global slowdown in M&A activity over the last couple of years, the energy sector experienced an M&A uptick with several major US deal announcements in late 2023.
In the US, there were 84 M&A deals announced in Q1 2024 for the sector, worth a total value of $53 billion.
Below, we explore the trends and themes driving this new, lucrative wave of deal activity in the oil and gas industry and what opportunities are on the horizon for shareholders and investors.
A Flurry of Deal Activity
The fourth quarter of 2023 set the stage heading into 2024 with a record $144 billion in deal announcements.
In October of 2023, ExxonMobil revealed plans to acquire Pioneer Natural Resources and its 850,000 net acres in the Midland Basin for $59 billion. Less than two weeks later, Chevron announced plans to purchase Hess Corporation for $53 billion, expanding their US shale position. On the heels of these large deal announcements, M&A activity in the energy sector has continued its momentum into 2024.
Another supermajor was announced in February with Diamondback Energy’s plans to acquire Endeavor Holdings for $26 billion—the largest deal announced for the sector since the beginning of 2024. The combined company would be the third-largest oil and gas producer in the Permian Basin of West Texas and New Mexico (behind ExxonMobil and Chevron), producing 816,000 barrels of oil and gas per day (boepd). It would compete with Exxon-Pioneer’s inventory of approximately 1.3 million boepd and Chevron’s 867,000 boepd in the region.
Simultaneously, in anticipation of the merger with Endeavor—which is still under FTC regulatory review—Diamondback announced plans to sell their stake in Remuda Midstream Holdings LLC (‘WTG Midstream’) for $375 million, a transaction expected to close in Q3 2024.
Opportunities in the Permian Basin
Diamondback’s acquisition of privately-owned Endeavor signals a shifting dynamic in the energy landscape that is reaffirmed by findings from Enervus: a surplus of lucrative opportunities remain in the Permian Basin despite these recent mega deals. One such deal—ExxonMobil’s acquisition of Pioneer— set out to double the conglomerate’s production volume in the region.
Unlike routine consolidations, the Endeavor deal was a unique opportunity to acquire a legacy, family-owned exploration and production (E&P) oil firm with a far-reaching footprint in the Midland Basin. Firms like Endeavor have operated for decades prior to larger-scale entities setting up shop in the region. In other words, deals remain for larger public entities that have their eyes set on acquiring similar private legacy companies in the region, as well.
Appetite for private equity investors to explore secondary targets and expand geographically into the Central Basin platform, especially with a higher risk tolerance than public companies, is also substantial. APA penned an agreement to acquire Callon Petroleum for $4.5 billion in an ongoing trend designed to expand operations in the Permian Basin earlier this year.
An expert perspective sourced from the AlphaSense platform weighs in on the strategic factors driving dealmaking in the Permian Basin:
“If you have your field sparsely located all across the Permian Basin, then that becomes quite a bit of a challenge to streamline those operations very well. I think Diamondback is looking at the same thing. Diamondback wants to make sure that they’re able to bring in their operations in such a way that maintaining of these wells and be able to drill and complete these wells with the supply chain aspect of it is they’re taking care of it extremely well at the same time to reduce the OpEx and stay profitable and be a market leader when it comes to these things.”
– Former VP at Pioneer Natural Resources | Expert Call
Elevated Regulatory Scrutiny
In the midst of this rampant deal activity, lawmakers are actively monitoring and requesting additional rounds of information as part of their regulatory oversight. Both ExxonMobil and Chevron received secondary requests for information from the FTC following their announcements. Occidental Petroleum also received regulatory pushback for their $12 billion acquisition of CrownRock, which stood to strengthen their portfolio with lucrative Permian Basin assets.
Recently, Chesapeake Energy’s $7.4 billion merger with Southwestern Energy was also delayed until the second half of the year after receiving additional FTC requests for information. It is evident that, despite accelerated deal activity, lawmakers are keen on maintaining healthy market competition. Ultimately, future deals should expect to receive the same scrutiny.
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Content Marketing Manager
Barb is a Content Marketing Manager covering the financial services segment at AlphaSense. Previously, she managed the content program at a global financial services firm.
Read all posts written by Barbara Tague
