In 2023, the oil and gas industry went on a $250 billion buying spree. They took advantage of high stock prices to secure cheaper reserves and position themselves strategically for expected industry consolidation.
The increased demand for oil, triggered by the global economic recovery from the pandemic-induced downturn, heightened the enthusiasm of acquirers. Major players such as Exxon Mobil, Chevron Corp, and Occidental Petroleum collectively executed acquisitions amounting to $135 billion during the year.
Additionally, ConocoPhillips sealed two significant deals in the preceding two years.
The main prize in this deal is the largest US shale oil field, the Permian Basin in west Texas and New Mexico.
The four companies are now set to control approximately 58% of the future production in that area.
Each company has the goal of extracting at least 1 million barrels per day (bpd) from the oilfield, which is projected to reach a total production of 7 million bpd by the end of 2027.
Moreover, additional transactions are anticipated.
According to a December survey by the Federal Reserve Bank of Dallas, three-quarters of energy executives expect more oil deals valued at $50 billion or more to emerge in the next two years.
Endeavor Energy Partners, the leading privately owned producer in the Permian shale, is considering a sale that could lead to increased consolidation of U.S. shale oil production.
“Consolidation is actively changing the landscape,” said Ryan Duman, director of Americas upstream research at energy consultancy Wood Mackenzie.
“A select few companies will determine whether (production) growth will be strong, more stable or somewhere in between,” Mackenzie added.
The process of consolidation has led US antitrust regulators to seek additional information from Exxon and Chevron regarding their acquisitions, causing delays in the completion of the deals.
Despite this, both companies express confidence in receiving approval, citing the substantial size of the US oil market and the presence of assertive smaller competitors as indicators of ongoing robust competition.
The trend towards fewer but larger oil producers, committed to prolonging the lifespan of their fossil fuel enterprises, may bring them into greater conflict with governments emphasizing a transition to clean energy sources.
In the meantime, global oil prices are anticipated to remain relatively stable in 2024, following an average of about $83 per barrel in 2023, a decline from $99 in 2022.
Analysts predict oil prices in 2024 to range between $70 and $90 per barrel, surpassing the $64 per barrel average observed in 2019.
