Merger and acquisition (M&A) activity in the U.S. oil and gas sector saw a 57 percent increase last year as higher cash flows from previous profits supported greater development spending, according to Ernst & Young‘s latest report.
Oil and gas companies in the U.S. saw M&A deals worth $49.2 billion in 2023, up from $31.4 billion in 2022. The report attributed this rise to mega deals among integrated oil and gas companies in the world’s largest economy.
Exploration and development spending rises
The report added that it expects M&A activity in the sector to continue growing in 2025, supported by additional mega deals.
Higher cash flows contributed to a surge in exploration and development spending last year which saw a 28 percent increase to $93.1 billion. In a bid to attract investors back to the sector, firms raised spending on dealmaking and expanded reserves, marking a shift in focus on shareholder returns over growth.
Last year, oil and gas companies in the U.S. cut spending on dividends and share repurchase payments to $28.9 billion from a record $57.7 billion in 2022.
Read: U.S. fortifies strategic crude oil stockpile with new 4.65 million barrel purchase
Expenditures surge
The sector-wide consolidation supported M&A activity in the U.S. oil and gas sector, boosting companies’ overall expenditures to $142.3 billion, up 36 percent from 2022.
Companies that had an excess of cash shifted their focus to driving efficiency through scale and leveraging existing operations. Their profits fell 55 percent in 2023 to $83.9 billion, mainly due to lower West Texas Intermediate (WTI) crude oil spot prices, the report added.
The report also revealed that Chevron was the top buyer of properties in 2023 with total property acquisition costs of $10.6 billion. That was largely due to the company’s $6.3 billion deal to buy PDC Energy. Meanwhile, Exxon Mobil completed the $60 billion acquisition of Pioneer Natural Resources in May this year.
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