US crude oil and gas exploration companies spent as much as $234bn on mergers and acquisitions (M&A) in 2023, the highest level in real dollar terms since 2012. 

According to the US Energy Information Administration’s (EIA) latest analysis, this uptick in deal-making marks a return to a trend of consolidation among oil companies in the US after transactions declined amid oil market volatility in 2020 and 2022.

Significant acquisitions included ExxonMobil’s acquisition of Pioneer Natural Resources for $64.5bn and Chevron’s $53bn deal to buy Hess. The EIA noted that these deals are the largest in real terms since Occidental Petroleum Corporation acquired Anadarko Petroleum Corporation for $55bn in 2019.

Owing to consolidation activity, larger companies now own more producing assets. According to the EIA, Chevron is currently the largest crude oil and natural gas producer in the US, accounting for 5% of average production in the third quarter of 2023. That share could increase to 6% if Chevron successfully acquires Hess.

However, the deal has been complicated by Exxon saying it may exercise preemptive rights that could block a 30% stake in a giant Guyana oil block that was at the centre of the Hess acquisition. ExxonMobil currently owns 45% of the block, while Hess holds a 30% stake.

“Barring any other large production or asset ownership changes, recent M&A could make ExxonMobil the largest crude oil and NGL [natural gas liquids] producer in the United States,” the EIA said.

The EIA noted that ExxonMobil could overtake Chevron as the largest producer in the US should the acquisition of Pioneer Natural Resources be successful.

According to the latest Dallas Fed Energy Survey, industry executives of companies active in the Permian Basin expect a continuation of large-size deal-making in the coming months. Of the 122 executives responding to the survey, 77% said they expected to see more acquisitions of $50bn or more occur in the next two years.