US oil and gas M&A activity surged 57% last year amid industry consolidation By Reuters

By Nicole Jao

NEW YORK (Reuters) – Trading activity in the oil and gas industry surged 57 percent last year as energy companies boosted development spending following higher cash flows from profits in previous years, according to a report on Tuesday .

Top energy companies will spend $49.2 billion on mergers and acquisitions in 2023, up from $31.4 billion in 2022, according to a report from Ernst & Young. The growth was mainly driven by mega-deals between integrated oil and gas companies.

M&A activity is expected to continue this year and into 2025, driven by several mega-deals, EY said.

Money spent extracting oil and gas also rose last year, with exploration and development spending rising 28 percent to $93.1 billion.

The rise in deal-making spending and reserve expansion marks a shift in strategy after years of focusing on shareholder returns over growth, which many firms have employed in an attempt to lure back investors who had left the sector.

Last year, oil and gas companies halved spending on dividends and share buyback payments to $28.9 billion, from a record $57.7 billion in 2022.

Sector-wide consolidation spurred M&A activity, boosting total corporate spending to $142.3 billion, up 36% from 2022.

“We started to see in 2023 a focus on consolidating the positions that operators had,” Bruce On, a partner in EY’s energy strategy and transactions group, said in an interview, noting a shift in strategy to invest in operations basic.

Cash-strapped companies focused on increasing efficiency through scale and leveraging existing operations, he said.

Their profits fell 55 percent in 2023 to $83.9 billion, mainly due to lower West Texas Intermediate (WTI) spot prices, the report said.

Chevron (NYSE: ) was the largest property buyer in 2023, with total property acquisition costs of $10.6 billion, largely due to its $6.3 billion deal to buy the exploration and production company Denver Oil Company. PDC Energy (NASDAQ: ), the report said.

ExxonMobil (NYSE: ) completed the $60 billion acquisition Pioneer Natural Resources (NYSE: ) in May of this year. In October, Chevron announced a deal to buy oil producer Hess (NYSE: ) for $53 billion. The deal, however, is delayed until at least mid-2025 due to a legal dispute.