In the ever-evolving landscape of the energy sector, oil and gas mergers and acquisitions (M&A) remain a pivotal force shaping the industry's future. The cyclical nature of the market, coupled with technological advancements and geopolitical shifts, has driven companies to continually reassess their strategies. Evidence in this issue’s special report, OGJ50, highlights the continually shrinking list of US publicly traded exploration and production companies with US reserves and production. This year the focus will be on the Top 50 US companies ranked by total assets for the fiscal year ending 2023.
Over the past few years, the oil and gas industry has experienced significant volatility. Fluctuating oil prices, the push for greener energy sources, and regulatory pressures have all contributed to an environment in which adaptability is vital. M&A activity is one strategy for companies looking to strengthen positions, diversify portfolios, and achieve operational efficiencies.
Downsizing the OGJ400
The OGJ400 debuted Oct. 17, 1983, highlighting a bustling era for exploration and production companies, despite bleak financial results caused by declining demand and depressed energy prices. The landscape began to shift in the early 90s, marked by a wave of consolidation, acquisitions, mergers, and liquidation. This downsizing trend prompted OGJ to rename the list OGJ300, reflecting the dwindling number of operating companies. By 1995, the count had dropped below 300 to 281, leading to another rebranding as OGJ200. At that time, the industry was experiencing strong financial performance, with growing demand and rising energy prices.
In 1998, however, energy prices plummeted, severely impacting the performance of companies on the list. Of the 200 companies included, 67% posted net losses, and only three made it to the report’s Fastest Growers list.
The energy crisis of the 2000s further reduced the number of qualifying companies. By 2009, OGJ renamed the report OGJ150. This downward trend persisted, and by the 2021 installment, the number of companies included on the list had fallen below 100.
In the face of mega mergers seen in first-quarter 2024, OGJ has again adjusted its focus. This year’s report showcases the Top 50 US oil and gas companies. The evolution to OGJ50 from OGJ400 follows the industry's ongoing consolidation and adaptation to market dynamics.
According to the US Energy Information Administration, upstream companies spent $234 billion (in real 2023 dollars) on M&A last year, the most since 2012.
A primary driver has been the quest for scale and efficiency. Larger, well-capitalized companies are leveraging their financial strengths to acquire smaller players or merge with equals, creating entities that can better withstand market fluctuations.
ExxonMobil’s acquisition of Pioneer Natural Resources in May 2024 increased its presence in the Permian basin to an estimated 16 billion boe. The Permian basin continues to lead the increase in US crude oil production and is expected to remain a strong source of growth for the future.
Diamondback Energy’s pending merger with Endeavor Energy, to be finalized later this year at a cost of $26 billion, could make Diamondback the third largest producer in the Permian behind ExxonMobil and Chevron.
Chesapeake Energy and Southwestern Energy agreed in January 2024 to an all-stock merger valued at $7.4 billion. The deal could create the largest natural gas production company in the US with estimated combined assets in Appalachian and Haynesville basins of 7.9 bcfd of net production.
As the oil and gas industry continues to evolve, companies that can manage the intricacies of M&A may be better positioned to thrive in the future energy landscape. To keep track of the progress, be sure to follow the OGJ50 group of companies in our pages.
Laura Bell-Hammer | Statistics Editor
Laura Bell-Hammer has been the Statistics Editor for the Oil & Gas Journal since 1994. She was the Survey Editor for two years prior to her current position with OGJ. While working with OGJ, she also was a contributing editor for Oil & Gas Financial Journal. Before joining OGJ, she worked for Vintage Petroleum in Tulsa, gaining her oil and gas industry knowledge.