Mergers and acquisitions in top EY’s list of 2024 trends in energy

ExxonMobil Corp., Chevron Corp. and Occidental Petroleum Corp. all wrapped up 2023 with multibillion-dollar acquisitions — and ConocoPhillips has made two major acquisitions in the past two years.

Those moves position the four companies to control 58% of Permian Basin production, according to a Reuters analysis. The recent megadeals also put pressure on others to catch the consolidation wave, making conditions right for a new round of tie-ups that could have a profound impact on Texas for years to come.  

That’s among the reasons mergers and acquisitions, or M&A, topped EY’s list of four oil and gas trends to expect in the new year, according to Pat Jelinek, Americas oil and gas leader at EY, formerly Ernst & Young.

These are the energy industry trends he’s watching for in the new year:

While high interest rates and inflationary pressures cooled deal-making in many sectors in 2023, the oil and gas sector has seen a surge in announced M&A activity. It’s being driven by strong cash flows, renewed investor confidence and increasing recognition that oil and gas will continue to play an important role in the energy landscape, Jelinek says. A wave of consolidations and strategic investments in low-carbon solutions — such as carbon capture, hydrogen and renewable natural gas, among others — will continue in the year ahead, as creative deal-making, partnerships and ecosystems emerge.

With stringent new climate disclosure rules set to take effect in the European Union, California and potentially the United States, 2024 looms as a crucial staging year for both the industry and its extensive supply chain. This regulatory uptick has led companies to accelerate efforts to reliably monitor and report emissions. However, shifting the thinking from compliance to innovation in future commercial opportunities will be front and center, Jelinek says. As examples, he’ll be watching how the industry considers product differentiation and less carbon-intensive products. 

The industry has responded to federal incentives for emerging energy technology, particularly in hydrogen and carbon capture. Oil and gas companies bring a unique level of financial wherewithal, technical skill and foresight in driving these new solutions forward, Jelinek says. However, while legislation such as the Inflation Reduction Act and Infrastructure Investment and Jobs Act provide incentives and funds for developing these technologies, it’s largely depended on participants to create demand. The real winners under the new legislation will be those companies that can best innovate new commercial approaches to novel business areas, he says.

Maximizing operations throughout the enterprise by using disruptive technology at speed and scale, all while upskilling the workforce, will be important as companies transform, Jelinek says. By focusing on operational efficiencies, the oil and gas industry can continue to solve complex issues while integrating new acquisitions, implementing emerging technologies such as AI, and utilizing real-time data and connected strategy to enable better, faster and more strategic decisions.