Oil M&A Stays Hot. Here’s Who’s Still Making Deals.
The big players in oil and gas like ExxonMobil are getting bigger, because of major acquisitions they’ve made over the past year. Now the smaller players are bulking up, too.
Last week, two medium-sized oil services companies merged, and a midsize Texas oil producer made a significant acquisition of a private producer. The trend will reduce competition in the sector, and potentially help the returns of the remaining players.
Offshore oil services company Noble Corp. announced on Monday that it will buy fellow offshore services operator Diamond Offshore Drilling for about $2 billion in cash and stock, after including net debt. The two companies are benefiting from an upswing in offshore activity, with producers planning several major multiyear projects after a long period of subdued offshore drilling.
“The timing of the acquisition likely reflects bullishness for Noble about offshore activity levels globally,” wrote Enverus Intelligence Research analyst Mark Chapman in an email.
“After years of underspending on global exploration and development, we see an uptick in activity to offset declines in [the] Gulf of Mexico and generate about 3 million barrels per day of production growth in Brazil and Guyana by 2030,” he added.
The oil services industry has already done $14 billion in deals in 2024, more than in all of 2023 and closing in on the $17 billion done in 2022, according to Chapman.
The services companies may also be merging to keep up with their customers—the producers that have been merging aggressively for months. As producers get bigger, they can potentially wring more discounts out of service companies. But the service companies can fight back by merging, reducing their own competition.
Oil and gas producers are still doing acquisitions, too, though the scale of the deals has diminished as all of the big U.S. producers have already made deals in the past year. On Wednesday, Dallas producer Matador Resources buying privately held producer Ameredev II, which is controlled by private equity firm EnCap, for $1.9 billion. The companies both produce oil in the same section of the Permian Basin of Texas and New Mexico. Combining operations should make them more efficient, analysts say.
“This deal continues a second land grab in the Permian Basin following an initial buying frenzy in 2016-2019 as public companies race against one another to secure remaining inventory,” wrote Enverus analyst Andrew Dittmar.
Write to Avi Salzman at [email protected]