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Industry Insights: Global Oil and Gas M&A Outlook Q2 2024

Core Content Overview

This report provides a comprehensive analysis of the global oil and gas M&A market during Q2 2024, highlighting key trends in deal volume, disclosed value, subsector performance, commodity prices, and market dynamics.

Key Insights

• Deal Activity:

  • 240 deals were announced in Q2 2024, with a disclosed value of USD 67 billion.
  • This represents a 10% decrease in the number of deals and a 34% decrease in total disclosed value compared to Q1 2024 (266 deals, USD 103 billion).
  • The global average disclosed value per deal dropped from USD 403 million in Q1 to USD 285.2 million in Q2.

• Megadeals:

  • Four of the largest deals in Q2 2024 totaled approximately USD 37.4 billion, accounting for 56% of the global disclosed value.
  • The largest deal was ConocoPhillips' acquisition of Marathon Oil for USD 23.6 billion, representing 35% of the quarterly disclosed value.
  • Only one deal exceeded USD 10 billion in Q2, compared to three in Q1.
  • The number of megadeals (over USD 1 billion) decreased from three to one, with a significant reduction in their value.

• Geographic Distribution:

  • The U.S. was the most active market, contributing USD 54 billion (80% of global disclosed value) through 79 deals, which make up 33% of all global deals.
  • Canada had 15 deals, totaling USD 0.9 billion, mainly in the upstream sector.
  • Brazil and Singapore were the second and third in terms of disclosed deal value, with USD 1.6 billion and USD 1.4 billion, respectively.

• Subsector Trends:

  • Upstream accounted for 80% of the total disclosed value, with 8 megadeals contributing USD 44 billion.
  • Midstream experienced the largest nominal value reduction, dropping from USD 26 billion to USD 10 billion (a 62% decrease), with 3 megadeals contributing USD 6 billion.
  • Downstream saw a 82% decrease in disclosed value, from USD 11 billion to USD 2 billion, with one megadeal accounting for half of the total downstream value.

Commodity Price Highlights

• Crude Oil:

  • Prices declined on a QoQ basis, with WTI at USD 81.5/bbl, Brent at USD 86.4/bbl, and Dubai Crude at USD 82.5/bbl.
  • The OPEC Crude Oil Basket increased slightly by 0.7% to USD 86.6/bbl.
  • Year-over-year increases were recorded for all major crude oil benchmarks, with WTI and Brent up by 15.4%.

• Natural Gas:

  • Henry Hub prices increased by 47.5% to USD 2.6/MMBtu.
  • Dutch TTF rose by 23.2% to USD 10.7/MMBtu.
  • Japan/Korea Marker increased by 32.5% to USD 12.6/MMBtu.
  • QoQ increases were seen in all major natural gas benchmarks, while YoY showed mixed results.

• Refined Products:

  • Regular Gasoline remained stable at USD 2.2/gal.
  • Diesel and Jet Fuel saw slight declines, with Jet Fuel down by 4.0% and Diesel down by 3.6%.
  • Heating Oil decreased by 3.8% on a QoQ basis but increased by 2.8% YoY.

Market Dynamics

• LNG Market:

  • Global LNG exports fell to 99.7 MMt in Q2 2024, a 8.4% decrease from Q1's 108.8 MMt.
  • The U.S., Australia, and Qatar remained key exporters, contributing 20.4 MMt, 19.7 MMt, and 19.4 MMt, respectively.
  • LNG prices rose in key-importing regions like East Asia and Western Europe due to reduced supply and high demand, especially from Asia.
  • East Asia accounted for 50% of global LNG trade, while Western Europe accounted for 22%.

• Rig Count:

  • The global monthly average rig count decreased by 3.6% to 64 rigs compared to the 2023 average.
  • The U.S. experienced the most significant reduction, with 76 rigs cut, while the Middle East added 13 rigs.
  • U.S. operators are adopting a cautious approach, prioritizing cash flow and modest production growth over substantial volume increases.

Economic and Currency Considerations

• Interest Rates:

  • Central banks in advanced economies are adopting a cautious approach to interest rate easing.
  • The Fed maintained the federal funds rate at 5.25% - 5.50%, while the ECB and Bank of Canada eased by 0.25%, reducing rates to 4.25% and 4.50%, respectively.
  • This divergence has increased market focus on the Fed's next rate movement and its impact on global indices.

• FX Rates:

  • The U.S. dollar remains strong, supported by robust U.S. GDP data and the Fed's rate stance.
  • USD/CNY increased to 7.21, while USD/JPY rose to 152.24.
  • The USD/BRL and USD/SAR have remained relatively stable, with minimal changes over the years.

Key Market Statistics

• Q2 2024 M&A Activity:

  • 240 deals with a total disclosed value of USD 67 billion.
  • ΔQoQ: -4% in deal count, -34% in disclosed value.
  • ΔYoY: +2% in deal count, -7% in disclosed value.
  • The U.S. remains the dominant player, with 79 deals and USD 54 billion in disclosed value.

• LNG Export Trends:

  • U.S. exports dropped by 15% to 20.7 MMt, while East Asia and Western Europe saw 11% declines in LNG imports.
  • The U.S. and Canada are expected to lead the expansion of LNG production capacity in the latter half of 2024.

Subsector Focus: Oilfield Services

• EV/EBITDA:

  • The average EV/EBITDA for the oilfield services sector was 1.30x (LTM) and 1.38x (FY23).
  • The median EV/EBITDA was 1.44x (LTM) and 1.33x (FY23).
  • Companies like Schlumberger Limited and Halliburton Company had EV/EBITDA of 2.07x and 1.47x, respectively.

• EBITDA Margin:

  • The average EBITDA margin for the sector was 20.01% (LTM) and 20.70% (FY23).
  • Halliburton and Schlumberger had EBITDA margins of 22.26% and 22.26%, respectively.

Summary of M&A Activity

• The U.S. remains the epicenter of global M&A activity, with 79 deals and USD 54 billion in disclosed value.
• LNG exports decreased due to geopolitical tensions and outages, but new liquefaction terminals are expected to alleviate supply constraints by 2027.
• Commodity prices show mixed trends, with natural gas benchmarks increasing significantly and crude oil and refined products showing slight declines.
• Integrated majors such as ExxonMobil and Chevron saw changes in their share prices and financial metrics, reflecting market volatility and strategic adjustments.
• The global M&A market experienced a notable decline in value, with a focus on upstream and midstream segments.
• Kroll provides market and financial data based on the most representative companies in the oil and gas sector, focusing on subindustries and market capitalization.