2022 oil and gas M&A outlook has been saved
2022 oil and gas M&A outlook
Rewriting the playbook on O&G dealmaking
Nearly two-thirds of oil and gas executives were highly optimistic about the strategic changes made by their organizations in the past year. Does the future hold more strategic shifts to be hopeful about, and what’s in store for 2022 overall? Our annual mergers and acquisitions (M&A) outlook takes a closer look at five trends that could reshape the oil and gas dealmaking landscape in the year ahead.
Will we see continued momentum in the year ahead?
The year 2021 was surprising in the crude oil and natural gas (O&G) industry for two main reasons: First, oil prices jumped beyond even the most bullish forecasts, by 75% year over year, to reach $75/bbl by the end of the year. Second, O&G companies showed unusually high capital discipline, with capex increasing only 17% even as oil prices rose sharply. These two elements have rewritten the O&G M&A playbook, as aggressive tactical or cyclical acquisitions have given way to restrained, strategic, and environment-focused buying in 2021.
The first half of 2021 saw the lowest level of O&G deal activity in the past 10 years, but it somewhat rebounded in the second half. Overall, global O&G M&A deal value in 2021 rose by a modest 18% to $269 billion, compared to 2020, with recoveries in upstream and oilfield services offsetting weakness in midstream and downstream.
While projected record cash flows of O&G companies at $90/bbl bode very well for O&G M&A activity, the trajectories of COVID-19 mutations and macroeconomic recovery are expected to influence activity level and pace in 2022. Fears of omicron-induced demand declines and their associated macroeconomic impact—including supply-chain disruption and inflation—may impede M&A momentum over the first half of 2022. But with rising vaccinations, a strong second half is possible. In the meantime, portfolio rebalancing and opportunities to integrate energy assets are likely to continue supporting M&A activity.
Download our 2022 oil and gas M&A outlook to learn more.
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