Exxon, Chevron led takeover activity in 2023, more deals expected in 2024 – WoodMac

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Wood Mackenzie’s recent analysis revealed a shift in the oi and gas industry, characterized by a wave of consolidation, which it said is poised to persist through the energy transition phase. 

In a Jan. 9 piece, WoodMac highlighted that the third quarter of 2023 witnessed an explosion in takeover activity, primarily spearheaded by industry giants ExxonMobil and Chevron. 

“Leveraging their robustly rated equity, ExxonMobil acquired Pioneer, while Chevron secured Hess, collectively amassing an announced deal value surpassing US$150 billion in that quarter alone—an unparalleled figure since 2014,” the report said. 

Exxon’s merger with Pioneer solidified its position as the world’s first mega major. The all-stock transaction valued at US$59.5 billion. Forbes called it the largest merger for the oil major, since that of Exxon and Mobil in the 90s, which was valued at US$81 billion. Chevron’s deal with Hess was valued at US$53 billion. It upgraded and diversified Chevron’s already advantaged portfolio, to include the Stabroek block offshore Guyana.

WoodMac said cost reduction, portfolio enhancement, and versatile capital allocation options stand out as pivotal factors driving these transactions. WoodMac’s analysis underscored that consolidation is not merely a strategic move but is transition-driven, with companies aiming to fortify corporate resilience and sustainability amid ongoing shifts within the sector.

Anticipating the momentum to persist, WoodMac predicts a continuation of upstream corporate deals in 2024, despite the dwindling pool of high-quality targets. 

WoodMac said consolidation within the fragmented U.S. independent sector emerges as a key battleground for future acquisitions. 

Furthermore, it said aspiring non-U.S. buyers, particularly Euro-majors, trading at relatively lower valuations than their U.S. counterparts, may enter the arena. However, executing such deals would necessitate innovative financing solutions to align valuations.

WoodMac emphasized the imperative of minimizing risk exposure for investors. 

“As the demand for high-quality assets or companies outstrips supply, deal prices soar due to a scarcity premium, posing challenges and necessitating astute risk management strategies to navigate this evolving landscape,” WoodMac added. 

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