Oilfield Service Sector Poised for Consolidation in 2025
Regulatory Shift Expected to Fuel M&A Activity
As the oil and gas industry gears up for a new era of growth, the oilfield service sector is bracing for a wave of consolidation in 2025. According to Deloitte’s 2025 Oil and Gas Industry Outlook, the incoming administration’s promise to relax regulations on the U.S. oil and gas industry is expected to trigger a surge in mergers and acquisitions.
Consolidation Among Oil Producers Sets the Stage
The anticipated uptick in deals follows a string of mega-mergers among oil producers, including Exxon Mobil and Pioneer Natural Resources, as well as ConocoPhillips and Marathon Oil. As these industry giants consolidate, small-sized oilfield companies may find themselves seeking favorable buyouts as their customer base shrinks.
Shale Patch Deals Reshape the Landscape
Deals across the U.S. shale patch have significantly reduced oilfield firms’ customer bases, particularly in the prolific Permian basin. This region, spanning Texas and New Mexico, is projected to produce 6.51 million barrels per day of crude in 2025, up from 6.29 million in 2024. The Permian basin accounts for nearly half of total U.S. output.
M&A Activity Reaches New Heights
In the first nine months of 2024, deals in the oilfield services sector reached $19.7 billion, the highest level since 2018. Moreover, buyer interest in drilling rigs increased in 2024, with deal value reaching $3.8 billion, its second-highest level since 2018.
Industry Insights
“We think the new administration could be positive for M&A, and that we will see a little more loosening around that because it was getting more difficult to get M&A done the last few years,” noted John England, Deloitte’s global sector leader for oil, gas, and chemicals practice. “A fairly fragmented (oilfield service) market and some loosening from the administration sets a nice stage for potential consolidation.”
FTC Scrutiny and Delayed Deals
U.S. lawmakers have been seeking increased scrutiny by the Federal Trade Commission (FTC) over multi-billion-dollar deals. This scrutiny led to delays in mergers, such as the $7.4 billion deal between Chesapeake Energy and Southwestern Energy, which was eventually closed in October. Similarly, Exxon Mobil and Pioneer Natural Resources received FTC requests related to their $60 billion merger, which closed in May.
As the oilfield service sector prepares for a new wave of consolidation, industry players are eagerly anticipating the opportunities and challenges that lie ahead.
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