U.S. Oil and Gas Industry Sees Major Consolidation in 2024 with $206.6 Billion in M&A Activity

In 2024, the U.S. oil and gas industry experienced a significant surge in mergers and acquisitions (M&A), with total deal value reaching $206.6 billion—a 331% increase from the previous year. This wave of consolidation has reshaped the sector, reducing the number of top publicly traded exploration and production companies from 50 to 40.

This consolidation trend signifies a strategic shift among energy companies from prioritizing shareholder returns to focusing on growth and operational efficiency. Despite the aggressive M&A activity, the sector faced financial challenges, including a 10% decline in profits to $74.8 billion, primarily due to softer commodity prices. Additionally, companies reduced spending on dividends and share repurchases by about 25% to $29.2 billion, and exploration and development expenditures decreased by 7% to $85.5 billion.

Key Mergers and Acquisitions:

• ExxonMobil and Pioneer Natural Resources: In May 2024, ExxonMobil completed the acquisition of Pioneer Natural Resources for $60 billion, marking the largest merger in the petroleum industry in two decades. This acquisition positioned ExxonMobil as the largest producer of shale gas in the Permian Basin.

• Chevron and Hess Corporation: In October 2023, Chevron announced an all-stock acquisition of Hess Corporation for $53 billion. This deal, which was approved by Hess shareholders in May 2024, expanded Chevron's assets, particularly in the oil-rich Stabroek Block in Guyana.

• Diamondback Energy and Endeavor Energy Resources: In February 2024, Diamondback Energy agreed to acquire Endeavor Energy Resources for $26 billion. This merger aimed to create a stronger independent entity with enhanced production capabilities in the Permian Basin.

• ConocoPhillips and Marathon Oil: In May 2024, ConocoPhillips announced an all-stock acquisition of Marathon Oil for $22.5 billion. This strategic move was intended to consolidate resources and strengthen operational efficiency.

Pat Jelinek, EY Americas Oil & Gas and Chemicals Leader, commented on the industry's transformation: “This is a defining moment for the U.S. upstream sector. Fewer, stronger players are emerging, and they are better capitalized, more efficient and laser-focused on resilient growth. The new top 40 companies aren’t just survivors; they’re poised to shape the future of American energy.”

Bruce On, Partner at EY-Parthenon, Ernst & Young LLP, highlighted the complexities of successful mergers: “In today’s complex oil and gas M&A environment, success requires more than just closing the deal and combining assets. Think of it like building a high-performance engine — acquiring the parts is just the beginning. To unlock real value, companies must carefully assemble and tune each component.”

The consolidation trend has several social and economic implications:

• Employment: Mergers often lead to workforce redundancies, potentially resulting in job losses. For instance, ConocoPhillips announced plans to cut up to 25% of its global workforce—around 2,600 to 3,250 employees and contractors—by the end of 2026 amid falling oil prices and rising production costs.

• Market Competition: With fewer but larger players, the competitive landscape of the industry changes, potentially affecting pricing, innovation, and service quality.

• Energy Security: Larger, more efficient companies may enhance energy production stability, contributing to national energy security.

The 2024 surge in M&A activity has significantly reshaped the U.S. oil and gas industry, leading to a more consolidated market with fewer, but more robust, companies. While this consolidation aims to enhance operational efficiency and long-term growth, it also presents challenges such as potential job losses and shifts in market dynamics. As the industry continues to evolve, stakeholders will need to navigate these changes carefully to ensure sustainable growth and energy security.