Several news articles have surfaced recently detailing speculation that a megadeal between ExxonMobil Corp. (NYSE: XOM) and BP Plc (NYSE: BP) may be in the works. As deal makers debate whether a US$100 billion deal is possible and market pundits weigh in on whether this record-breaking deal makes strategic sense, it all begs the question about M&A in the energy sector in general.

Current State of M&A

2017 is off to a strong start for the energy and power sector in terms of deal activity. The industry has the largest investment in M&A of all areas, with volume totaling US$140.1 billion in the first three months of the year, as shown in Figure 1. This is 48% more than the next closest industry, materials, yet with 119 fewer actual deals: 826 vs. 707, respectively; and, 55% fewer M&A deals than the most prolific 2017 sector overall: high technology (1,584 deals), according to the Thomson Reuters Deals Intelligence report.

The 2017 energy and power numbers represent a 60% increase over the same time frame last year, with many of the top M&A deals in the sector driven by a reorganization of corporate structures and joint ventures. Some of these top deals were Tulsa, Okla.-based Oneok’s acquisition of a remaining 60% interest in Oneok Partners LP for US$17 billion, and Cenovus Energy’s purchase of the 50% interest it did not already own in FCCL Partnership. Canada’s Cenovus bought the interest from the crude and gas producer from ConocoPhillips Co.—its joint venture partner—for US$13.2 billion. Additionally, Williams Partners, also of Tulsa, acquired 100% of WPZ GP LLC, the owner and operator of its natural gas pipelines, for US$11 billion.

Source: Thomson Reuters Deals Intelligence

These purchases came on the heels of Royal Dutch Shell Plc’s (NYSE: RDS.A) purchase of BG Group. That US$70.1 billion deal closed in 2016. The later purchases also follow 2016’s announcement that Sunoco Logistics Partners LP intended to acquire Energy Transfer Partners LP for US$51.4 billion, as shown in Figure 2.

Source: Thomson Reuters Deals Intelligence

Momentum Continues

Despite the uncertain geopolitical environment, continued sagging prices and questions about OPEC’s production output, Thomson Reuters data show that global deal making activity in the energy sector totaled US$608 billion, an increase of 15% during full year 2016, and up 5% by number of deals. Full-year 2016 ranked as the largest annual period for energy and power M&A since our records began in 1980. Energy and power M&A was just one of three sectors to see year-over-year (yoy) growth during full-year 2016, driven by the largest all-time quarter for tie-ups in the sector during the fourth quarter (US$253.5 billion), as shown in Figure 3. Most other industries saw double-digit declines as the value of overall worldwide announced M&A deals fell 16% during full-year 2016.

Figure 3. Worldwide Energy & Power M&A, by quarter, since 2007

Source: Thomson Reuters Deals Intelligence

Along with the tie-up between Sunoco Logistics Partners and Energy Transfer Partners, Canada’s Enbridge Inc. announced a US$43.1 billion plan to acquire Spectra Energy Corp., and Baker Hughes received a US$31.7 billion bid from GE Oil & Gas after a proposed US$38.5 billion offer from Halliburton Co. collapsed in May of last year.

Megadeals Abound

Energy and power also had 60% more megadeals (valued at US$5 billion or more) in 2016 than 2015, with 27 vs. 17, respectively. One-quarter of the worldwide megadeals were from energy and power, and it was the only sector to experience increases in both the value and number of deals yoy, despite the overall economic environment.

The U.S. was the most acquisition-focused country, with US$328.3 billion worth of deals accounting for 42% of the total M&A activity. Cross-border M&A deals also fared quite well, accounting for 46% of the sector’s annual activity, and were valued at US$280.3 billion.

What Lies Ahead

While there isn’t a crystal ball to know for certain the outcome of an ExxonMobil/BP potential merger, or any of the other pending energy-related deals, keeping an eye on industry M&A trends is essential when analyzing the sector. With the market’s volatility, ongoing low Brent and crude prices and a vacillating geopolitical environment, the timing could be right for the continued clip of activity seen thus far in 2017.

Matt Toole is head of Deals Intelligence for Thomson Reuters Financial & Risk. For future updates on energy-specific deals intelligence, sign up for real-time updates at and follow @Dealintel.