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Braking point: Could upstream M&A activity be poised for a slowdown in 2025?
Upstream merger and acquisition (M&A) activity stood at around $205 billion last year, having continued the strong momentum from 2023, and marked just the second time in the past decade that deal value exceeded the $200 billion mark. But how did things fare last year, and what is the outlook for 2025? North America, despite a 21% year-on-year decline in terms of value, continued to lead that activity, accounting for $134 billion – or 65% – of the total deal value in 2024. This contribution was led by around 17 consolidation-focused US shale sector deals struck in the year, compared with three acquisitions in late 2023 that essentially kickstarted the trend. Diamondback Energy’s purchase of Midland Basin-focused Endeavour Energy for around $26 billion, ConocoPhillips’ buyout of Marathon Oil for $22.5 billion and Chesapeake Energy’s purchase of Southwestern Energy for nearly $11.7 billion were the largest US deals completed in 2024.
The consolidation wave was largely confined to shale plays in the Permian, Bakken and Eagle Ford, with some instances in Canada and the US Gulf of Mexico. Chesapeake’s acquisition of Southwestern and EQT Corporation’s decision to sell its non-operated Marcellus shale assets to Norwegian energy giant Equinor provided some momentum to gas-focused M&A activity in 2024. A consolidation spree, however, has yet to be seen, primarily due to volatile and depressed Henry Hub gas prices since 2022. Rystad Energy expects activity in the US shale gas sector to potentially pick up pace going forward, with Henry Hub prices expected to range between $3 and $3.5 per million British thermal units (MMBtu) for the next few years and potential investment opportunities that offer scale.
However, with a major portion of the consolidation wave behind us and around $80 billion worth of upstream opportunities on the market, Rystad Energy expects North American M&A activity to decline year-on-year but still dominate overall global deals.
M&A activity in the rest of the world remained robust last year, with Africa, Oceania, the Middle East, and South America (excluding Chevron’s acquisition of Hess, which includes the latter’s stake in Guyana’s Stabroek Block) each observing a more than 90% year-on-year increase. Deal value in Africa surged 93% year-on-year to more than $13 billion in 2024, driven by continued portfolio rationalization efforts by global majors and international oil companies (IOC). Sellers, which included Shell, TotalEnergies, Chevron, BP, Galp Energia, Marathon Oil, and MedcoEnergi, accounted for $9.8 billion worth of divestitures – or around 75% of the total deal value – in the region. This has created growth opportunities for regional players and an additional option for international expansion from Middle Eastern national oil companies (NOC) – many of which are also driving dealmaking in their own domestic markets. QatarEnergy and ADNOC’s LNG expansion plans have pushed deal value in the region to nearly $10 billion – the second-highest level since 2019.
With nearly $151 billion worth of upstream opportunities on the market, Rystad Energy believes this year’s global M&A activity is unlikely to reach the levels seen in the previous two years as most of the consolidation wave in the US shale patch has been finalized. Ongoing geopolitical tension in the Middle East and the fiscal environment in the UK are also expected to weigh down on dealmaking going forward. Meanwhile, this could be partially offset by a potential resurgence in US shale gas contracts, supported by US President Donald Trump’s resumption of LNG export permits, provided Henry Hub prices remain favorable.
Atul Raina
Vice President of Upstream M&A Research