New M&A Strategy by Oil Producers: Deals That Make Money

The focus for deals has become a way for oil and gas companies to create a stronger balance sheet that doesn’t allow for them to be caught off guard if prices weaken, says analyst.

New M&A Strategy by Oil Producers: Deals That Make Money

Amid the effects of the pandemic, deal values increased more than 70% to $141 billion in the trailing 12 months, led by upstream deals that contributed $38.6 billion in value, according to a PwC report. (Source: Hart Energy)

One surprising outcome of the recent large-scale consolidation in the oil patch seen the past 12 months has been the tendency of deals to produce actual savings and increased value.

While mergers in the past may have focused on increasing shale runway, more recent combinations have ridden on goodwill from investors, an easing of pandemic restrictions and rising commodity prices.

The industry has largely shaken off the abysmal first half of 2020, when upstream deal value dropped by 97% to their lowest levels since the first half of 2011, according to PWC’s midyear outlook. Amid the effects of the pandemic, deal values increased more than 70% to $141 billion in the trailing 12 months, led by upstream deals that contributed $38.6 billion in value.

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Darren Barbee

Darren Barbee is senior editor for Oil and Gas Investor magazine.