U.S. Oil and Gas Industry Sees Unprecedented M&A Surge in 2024

In 2024, the U.S. oil and gas industry experienced an unprecedented surge in mergers and acquisitions (M&A), with total deal value reaching $206.6 billion—a more than fourfold increase from the previous year's $47.9 billion. This consolidation trend occurred despite a decline in commodity prices, indicating a strategic shift among major industry players.

Leading this wave of consolidation were prominent companies such as Exxon Mobil, Diamondback Energy, and ConocoPhillips. Exxon Mobil emerged as the top acquirer, investing $84.5 billion in acquisitions, including a significant $60 billion purchase of Pioneer Natural Resources, which was completed in May 2024.

ConocoPhillips also made a substantial move by agreeing to acquire Marathon Oil for $22.5 billion in an all-stock deal. This acquisition, announced in May 2024, is expected to close in the fourth quarter of 2024 and aims to enhance reserves and operational efficiency.

The surge in M&A activity reflects a strategic pivot from prioritizing shareholder returns to focusing on scaling operations for improved efficiency and profitability. Companies reduced dividends and share buybacks by 25% to $29.2 billion and slightly decreased exploration and development budgets by 7% to $85.5 billion. Despite these efforts, sector profits declined by 10% to $74.8 billion due to weaker commodity prices, highlighting the industry's renewed emphasis on operational improvements and scalability.

The Federal Trade Commission (FTC) approved Exxon Mobil's acquisition of Pioneer Natural Resources but imposed a condition barring former Pioneer CEO Scott Sheffield from joining Exxon's board. The FTC alleged that Sheffield had colluded with OPEC to raise oil prices, leading to this restriction.

The consolidation within the oil and gas sector has significant implications for the U.S. economy and energy security. By combining resources and operations, these mergers aim to enhance efficiency and reduce costs, potentially leading to more stable energy prices for consumers. However, concerns about reduced competition and potential price manipulation have prompted regulatory scrutiny.

The surge in M&A activity within the U.S. oil and gas sector in 2024 reflects a strategic pivot towards consolidation and operational efficiency in response to declining commodity prices. While these mergers aim to bolster profitability and energy security, they also raise important questions about market competition and regulatory oversight.