Oil and gas producers spent $234 billion on mergers and acquisitions in 2023, the most in over a decade, federal officials say.

The spike in dealmaking was the most in real 2023 dollars since 2012, according to figures published by the U.S. Energy Information Administration (EIA).

Transactions fell off drastically from 2020 through 2022 due to significant oil market volatility and supply-demand imbalances caused by the COVID-19 pandemic.

Upstream oil and gas dealmaking activity grew to $234 billion in 2023, according to an EIA analysis. (Source: U.S. Energy Information Administration; Evaluate Energy; U.S. Bureau of Labor Statistics)

The $234 billion total includes asset acquisitions and corporate M&A, which accounted for 82% of total announced dealmaking last year.

That was largely due to two massive transactions, the EIA said: Exxon Mobil’s $64.5 billion acquisition of Permian Basin juggernaut Pioneer Natural Resources and Chevron’s $60 billion acquisition of Hess Corp.

“These deals are the largest by value in real terms since Occidental Petroleum Corporation acquired Anadarko Petroleum Corporation for a total acquisition cost of $55 billion in 2019,” the EIA wrote in a May 19 report.  

Both transactions will yield even larger energy companies owning more producing assets. Chevron is the nation’s top producer of crude oil and NGL. The company averaged just over 1 MMbbl/d in third-quarter 2023, accounting for 5% of domestic production.

If Chevron completes its acquisition of Hess, “it could increase Chevron’s share of U.S. production to 6%,” or just over 1.2 MMbbl/d, based on third-quarter data, the EIA said.

Closing the deal isn’t a guarantee for Chevron, the EIA notes. Chevron’s primary goal by picking up Hess is to buy into the prolific Stabroek Block offshore Guyana. Exxon owns a 45% stake in the Stabroek joint venture, while Hess owns 30%; the China National Offshore Oil Corp. (CNOOC) owns the remaining 25% interest.

But Exxon has filed an arbitration claim to block Chevron’s acquisition of Hess’ stake offshore Guyana, claiming a right to first refusal of a sale.

“The outcome of the claim could affect whether the acquisition is completed or not,” the EIA wrote.

Exxon Mobil is the fourth-largest producer of crude and NGL in the U.S., but the Texas-based supermajor could jump to the nation’s largest producer by acquiring Pioneer Natural Resources.

Following the acquisition, Exxon’s production could increase to nearly 7% of total U.S. output—from about 750,000 bbl/d to 1.3 MMbbl/d. 

EIA Production
Some of the nation’s biggest oil and gas producers are getting bigger through high-profile deals inked in 2023. (Source: EIA; Evaluate Energy)

The tie-up of Pioneer and Exxon would bring together two of the largest producers in the Permian Basin, the nation’s top oil-producing region and a main driver of future U.S. oil output growth.

“ExxonMobil expects that combining its 570,000 net acres in the Delaware and Midland Basins—both sub-basins of the Permian Basin—with Pioneer’s more than 850,000 net acres in the Midland Basin will result in an estimated 16 billion barrels of oil equivalent (BOE) worth of reserves in the Permian Basin,” the EIA wrote.

But Exxon’s Pioneer acquisition also isn’t guaranteed to close. Those companies, as well as Chevron and Hess Corp., have received requests from the Federal Trade Commission for additional information about both deals.

Several other upstream companies have announced notable mergers recently. Diamondback Energy’s $26 billion acquisition of Endeavor Energy Resources would be the largest buyout of a private upstream company when it closes.

Occidental Petroleum is acquiring private E&P CrownRock LP for $12 billion to add scale and inventory runway in the Midland Basin.

Gas producers Chesapeake Energy and Southwestern Energy are combining in a $11.5 billion merger.

Experts say the wave of consolidation shows no sign of cresting or slowing anytime soon.

“[Consolidation] is a natural progression of maturity that goes through these basins,” ConocoPhillips CEO Ryan Lance said March 19 at the CERAWeek by S&P Global conference. “And we’re not done—it’s going to continue.”