By Nicholas Earl
Mega deals in the oil industry hiked October merger and acquisition (M&A) activity to its highest level in 17 months, although global activity is still at a decade low, according to new research from the London Stock Exchange Group.
Its latest monthly report from the group’s ‘Deals Intelligence‘ unit revealed that $319bn worth of M&A transactions were recorded globally during October 2023.
This is the third consecutive monthly increase in global dealmaking, and was one third more than the value recorded during the previous month.
Such a bumper window of oil dealmaking was fuelled by Exxon Mobil’s snapping up of Pioneer Natural Resources and Chevron’s acquisition of Hess.
However, worldwide activity is still heavily down year-on-year totalling $2.38bn for the first ten months of business, which is 20 per below the same period in 2022.
It is also the lowest January to October total in a decade, despite highest monthly global M&A total since May 2022.
Overall, 62 mega deals – valued at $5bn or more – were recorded during the first 10 months of 2023, seven less than last year at this time and the lowest January to October total since 2013.
The combined value of these deals is $814bn, down 12 per cent year-on-year.
This was seen most acutely in the downturn in private equity-backed M&A, which dropped 39 per cent this time last year.
It accounts for 19 per cent of total global M&A so far during 2023, compared to 24 per cent last year at this time.
By contrast, energy and power has been the leading sector during the first ten months of 2023, with deals totalling $424bn, accounting for 18 per cent of total global M&A.
This was particularly noticeable in the oil and gas sector, where M&A activity reached $261bn, the highest level since 2015.
It was one of few sectors, alongside healthcare, materials and consumer staples to see an increase in the value of M&A from last year, while technology was the only sector to see an increase in the number of deals.
Jim Mitchell, head of Americas oil research at London Stock Exchange Group (LSEG), said: “The mega mergers and the host of smaller mergers on the exploration and production side within the oil and gas industry are occurring principally for the reason of efficiency.
“Efficiency in capital deployed and efficiency of drilling locations. Essentially, even at these elevated oil prices, it is more efficient to buy proven reserves than it is to test and develop new reserves.”
