The oil and gas industries have experienced a rapid increase in mergers and acquisitions (M&A) worldwide despite economic uncertainty, inflation, and supply chain issues.
According to PitchBook, the total value of both pending and completed energy deals reached $170.9 billion in June 2022. By the end of the year, 2022’s total is expected to vastly exceed the 2021 full-year value of $295 billion. The biggest driver of M&A has been the segment that produces and refines oil, representing 57% of the industry's deal value, totaling $98 billion.
Companies participating in this trend include Australia-based Woodside Energy Group's merger with BHP Petroleum, whose deal was valued at a whopping $40 billion. Norway's Aker BP also bought out Sweden-based Lundin Energy for $14 billion in late June. Blackstone and Blue Water Energy sold Siccar Point Energy, a North Sea oil and gas producer, to Israeli Ithica Energy for $1.5 billion. Additionally, Texas energy explorer Colgate Energy Partners III agreed to a merger with Centennial Resource to form a $7 billion company producing oil and gas in the Delaware Basin, a West Texas and Southern New Mexico oil deposit.
Experts at PitchBook say that the industry is looking to consolidate in light of excess cash flow from high energy prices. Prices trending up means this is an ideal window for private equity (PE) firms to cash out their oil and gas investments. PE firms like Warburg Pincus are also cashing out their energy investments in favor of greener energy options. There have been over $37 billion in transactions since Q2 2021, including $13.2 billion in transactions this year alone. The extra cash flow results in more cash deals, PwC Energy Analyst Seenu Akunuri told PitchBook, and a cooldown isn’t likely until demand for oil and gas decreases.