Upstream merger and acquisition (M&A) activity is expected to decelerate significantly in 2025, following two years of record-high transactions driven by US shale mergers.
The global deal pipeline value currently stands at approximately US$150 billion, as much of the sector’s consolidation has run its course, making a return to recent peaks unlikely.
North America is poised to maintain its dominance in global M&A activities, with nearly US$80 billion in upstream opportunities on the market.
South American deal value saw a substantial increase, rising from US$3.6 billion in 2023 to US$14.1 billion in 2024, excluding Chevron‘s acquisition of Hess.
Atul Raina, Vice President of Oil & Gas Research at Rystad Energy, commented on the situation: “Last year marked a significant year of consolidation in the US shale sector, with approximately 17 consolidation-focused deals, compared to just three acquisitions in late 2023.
“Activity was always expected to fall after such dramatic highs, but there is still plenty of business to be done.”
The Middle East is rapidly emerging as a significant centre for M&A activity, bolstered by liquefied natural gas (LNG) expansion plans.
The region recorded its second-highest year of M&A activity since 2019, with deal value reaching nearly US$9.65 billion in 2024.
M&A deal value in Europe decreased by around 10 per cent year-on-year, to US$14 billion in 2024.
Approximately 75 per cent of the regional total centred on the UK, where majors have been adopting an autonomous model strategy to expand their presence in the North Sea.
Several factors are expected to create notable headwinds for market participants, including geopolitical tension in the Middle East, the ongoing conflict in Ukraine, and the UK’s challenging fiscal environment.
Despite these challenges, there remains potential for further upside if US shale gas M&A activity increases, assuming Henry Hub prices remain stable and conducive to dealmaking.
The outlook for future M&A activity in Europe remains uncertain due to fiscal policy in the UK, which accounts for 73 per cent of the potential deals, valued at about US$5.9 billion.
However, combining portfolios that balance deferred tax positions and future expenditure could be an emerging trend in the country’s M&A landscape, given the current fiscal challenges.
