Oilfield service consolidation to increase under Trump, report says

By Georgina McCartney

HOUSTON (Reuters) - The oilfield service sector is poised for more consolidation in 2025, according to Deloitte's 2025 Oil and Gas Industry Outlook, with President-elect Donald Trump expected loosen regulations on the U.S. oil and gas industry.

The uptick in deals in the services sector would follow a wave of mega-mergers among oil producers, including Exxon Mobil (NYSE:XOM ) and Pioneer Natural Resources (NYSE:PXD ) and ConocoPhillips (NYSE:COP ) and Marathon Oil (NYSE:MRO ).

Small-sized oilfield companies could seek favorable buyouts as their customer base consolidates and shrinks, according to Deloitte, the world's largest consulting firm, following rampant M&A activity across upstream customers.

WHY IT MATTERS

Deals across the U.S. shale patch have shrunk oilfield firms' customer bases, notably in the prolific Permian basin straddling Texas and New Mexico. That field is set to produce 6.51 million bpd of crude in 2025, according to the EIA, up from 6.29 in 2024. It accounts for just under half of total U.S. output.

BY THE NUMBERS

Deals in the oilfield services sector in the first nine months of 2024 reached $19.7 billion, the highest since 2018, according to Deloitte.

Buyer interest for drilling rigs increased in 2024 with deal value reaching $3.8 billion, its second-highest level since 2018.

KEY QUOTES

"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," Deloitte's global sector leader for oil, gas and chemicals practice John England said in an interview.

U.S. lawmakers have sought increased scrutiny by the Federal Trade Commission (FTC) over multi-billion dollar deals.



Gas producers Chesapeake Energy (NYSE:CHK ) and Southwestern Energy (NYSE:SWN ) delayed their $7.4 billion merger after the FTC requested further information in April. The companies closed the deal in October. Exxon Mobil and Pioneer Natural Resources received similar requests from the FTC related to their $60 billion merger, which closed in May.

"A fairly fragmented (oilfield service) market and some loosening from the administration sets a nice stage for potential consolidation," England said.

Source: Investing.com