Key points:

  • The oil and gas industry saw a $250 billion buying spree in 2023.
  • The main objectives of the deals were to acquire untapped and cheaper oil and gas reserves, as well as prepare for the next upheaval in the industry.
  • The four largest US oil companies (Exxon Mobil, Chevron, Occidental Petroleum and ConocoPhillips) have entered into deals totaling $135 billion.

The oil and gas industry has been on a shopping spree in 2023, splashing out an eye-watering $250 billion to acquire smaller companies and secure cheaper reserves.

This buying frenzy has been fueled by a combination of factors, including the rising demand for oil as the global economy recovers from the pandemic, the high share prices of energy companies, and the anticipation of further consolidation in the industry.

The four biggest players in the US oil and gas industry – ExxonMobil, Chevron, Occidental Petroleum, and ConocoPhillips – have been the most active acquirers, collectively spending over $135 billion in 2023.

The main target of these acquisitions has been the Permian Basin, the largest shale oil field in the United States, located in West Texas and New Mexico.

Each aims to produce at least 1 million barrels per day from the field, which is expected to produce 7 million barrels per day by the end of 2027.

More deals are on the horizon. Three-quarters of energy executives surveyed in December by the Federal Reserve Bank of Dallas expected more oil deals worth $50 billion or more to emerge in the next two years.

Endeavor Energy Partners is considering a sale that could further concentrate U.S. shale oil production.

Consequences of industry monopolization

The consolidation of the oil and gas industry will have a ripple effect on oilfield service companies and pipeline operators. These companies that provide drilling, fracking, sand, and transportation services to oil and gas producers will face increased competition as fewer customers have more leverage over pricing.

“Consolidation is good for manufacturers, but it doesn’t help service companies at all. It will reduce their profits as existing contracts are renegotiated,”

– said one of the leaders of an American oil producing company.

 

Monopolization: to be or not to be?

The latest acquisitions illustrate oil companies’ pursuit of untapped and cheaper oil and gas reserves.

In 2023, Exxon Mobil (XOM.N) made a $59.5 billion bid to acquire Pioneer Natural Resources and a $4.9 billion purchase of Denbury Inc. Chevron Corp (CVX.N) offered Hess (HES.N) $53 billion and bought oil rival PDC Energy for $6.2 billion.

This buying spree is being fueled by rising global oil demand, which has increased by about 2.3 million barrels per day over the past two years to reach 101.7 million barrels per day. The increase in demand has boosted global oil inventories, helping to balance prices as OPEC and its allies curbed output.