PE Live Webcast | Oil and Gas M&A Outlook 2023: Pivoting for Change
Join industry leaders from Deloitte to explore opportunities for oil and gas companies to develop strategies.
Geopolitical events and economic uncertainty contributed to volatile energy prices across the globe in 2022. Despite record energy prices and low valuations, M&A activity in the oil and gas (O&G) sector fell to its lowest level since 2008.
This contradiction is explained in part by the end of the long-standing correlation between M&A activity and oil prices as O&G companies remain committed to capital discipline. Instead, free cash flows have been directed toward paying dividends and doing buybacks. The old drivers of M&A activity such as investing and acquiring for growth and increasing market share seem to have been replaced by new drivers.
New strategic drivers of M&A:
Energy security emerged this year as a major driver for M&A activity, with companies increasing their focus on securing supply chains from production to shipping and transport.
Operational excellence has become imperative in an environment where capital discipline determines success. As a result, M&A is often driven by increased consolidation to promote operational efficiencies and improvements in automation, digitalization, and productivity. The energy transition continues to be one of the driving factors (as mentioned in previous O&G M&A Outlooks), with 15% of total O&G M&A deal value taking place in the clean energy space in 2022.
Companies continue to develop new partnerships with lower-carbon entities. While JVs are not directly related to M&A activity, partnerships can lead to deals down the line.
Finally, ESG considerations also continue to influence a company’s corporate strategy, with 70% of M&A activity involving companies buying companies with higher ESG ratings in 2022.
Over the last two years, the O&G industry has moved from engaging in M&A to build resilience amid COVID-related uncertainty to building a new core—whether that be low-carbon O&G development or expansion into cleaner energy solutions. In the coming year, these drivers are expected to continue impacting M&A decisions—although the total volume of activity will continue to depend in part on external factors such as the economy, interest rates, geopolitics, and new policies and regulations.
Meet the speakers:
Moderator: Amy Chronis
Watch this PE Live Webcast in association with Deloitte to explore and understand the M&A landscape and how strong and efficient O&G companies have an opportunity to develop strategies to change the game in 2023 and beyond.