For the most part, M&A transactions in the oil and gas industry have declined since 2018. One area trending upwards though are deals (divestures and acquisitions) that contribute to net zero targets.
They are a number of forces at play and M&A differences are being driven by strategies that are unique to largest players in the industry. Players in the USA tend to be investing more in local oil and gas plays and in solutions that reduce emissions form traditional energy sources, while European players tend to be selling traditional O&G assets and investing in new energy businesses, and middle-east national players seem to be investing vertically while they have a larger influence on price.
Lenders and shareholders have pushed more cleaner energy. However, energy transition is as much about how to meet the growing energy needs of emerging countries as it is about producing cleaner energy. With cleaner energy sources producing a lower return on investment, markets are now providing pressure for better returns. And governments are pushing for increased energy security over lower carbon energy sources. With rising interest rates, a potentially growing economy, along with loads of cash from recent high prices, it is hard to tell what the outlook will be for M&A activity.
Cash for these companies has recently been used to pay increased dividends and buy backs of stock. I believe conditions could be shifting for increased future M&A activity, perhaps with a shift in acquiring larger companies as opposed to startup companies in the new energies space.