Rig market, oil & gas mergers and JV blockbuster moves mark 2024

A consolidation wave is sweeping across the challenging and shifting global energy landscape, as companies in the hydrocarbon exploration and production (E&P) and offshore drilling domains, alongside others across the entire energy industry and supply chain, race to secure their spots among the top contenders with a long market life span to benefit from a spike in global energy demand.

Multiple factors drive the development of new energy projects, as the world strives to strike the right balance between energy security and sustainability. While decarbonization is making inroads on the global offshore energy scene, these strides have not yet come close to the level needed to reach a carbon-neutral world.

Many place the blame on oil, gas, and liquified natural gas (LNG) projects’ shoulders for the slow pivot to green energy, however, security of supply is still running the show and fueling the development of fossil fuels to meet the growing demand and keep the lights on.

Players in the rig market and offshore oil and gas arena are increasingly embracing the consolidation trend on a quest for longevity spell, which is driving the search for efficiency enhancement to enrich with new building blocks existing companies and create combined entities of scale for the long haul.

One merger that closed last year was an all-stock transaction between ConocoPhillips and Marathon Oil Corporation, with an enterprise value of $22.5 billion, inclusive of $5.4 billion of net debt. This will enable the former to get the latter’s high-quality multi-basin portfolio encompassing four of the most competitive resource plays in the United States: Eagle Ford in Texas; Bakken in North Dakota; Permian in New Mexico and Texas, and Stack and Scoop in Oklahoma, complemented by an integrated gas business in Equatorial Guinea.

ConocoPhillips expects share repurchases to exceed $20 billion within the first three years, with more than $7 billion in the initial full year, as well as two billion barrels of compatible resources. The U.S. player also anticipates at least $500 million of run-rate cost and capital savings within the first full year following the closing of the transaction.

Multiple business combinations were disclosed in 2024, with several mergers and acquisitions (M&A) completed during the year while some fell through. Last year kicked off with a bang, resulting in the biggest first quarter for global upstream dealmaking in five years, according to Rystad Energy, a research and energy intelligence player, which estimated the upstream industry could witness another $150 billion of M&A deals during 2024 after the global M&A deal value crossed the $64 billion mark.

The company underlined that the M&A buzz represented the strongest first-quarter performance since 2019 and a 145% increase compared to the first quarter of 2023, fueled primarily by consolidation in the U.S. shale patch, with deals in North America totaling $54 billion in the first quarter of the year, about 83% of the worldwide total, with the region continuing to be the driving force for the rest of 2024, with nearly $80 billion of assets still on the market.

America’s shale sector was expected to be the engine driving the activity with 66% or slightly more than $52 billion of assets on the market. Rystad Energy highlighted that ExxonMobil, Chevron, Occidental Petroleum (Oxy), and Diamondback Energy‘s portfolio adjustments were set to invigorate short-term M&A activity.

These players were planning to divest non-core assets, paving the way for growth among regional upstream players. While Chevron intends to sell approximately $10 billion to $15 billion of assets by 2028, Oxy plans to divest between $4.5 billion and $6 billion.

Atul Raina, Vice President of Upstream Research at Rystad Energy, underlined: “Permian has been the focal point for M&A activity in recent times, but that focus is waning as available assets in the basin become scarce.

“But with appetite still strong, deal-hungry players are looking outside the basin for acquisitions. A power shift could be on the cards, with non-Permian assets taking center stage in the future North American deals pipeline.”

The merger and acquisition activity outside the U.S. also remained strong in the first quarter of 2024, with $10.5 billion changing hands, a 5% year-on-year increase, spearheaded by oil and gas upstream oil majors BP, Chevron, Shell, and TotalEnergies, which collectively accounted for $5.2 billion. Demand for gas-producing resources was high, representing about 66% of total resources bought and sold in the first quarter of 2024. 

The global M&A arena was dominated by North America but Africa also saw notable activity, with transactions surpassing $5.3 billion, fueled by oil and gas upstream majors, with the largest deal being Shell’s divestment of its 30% stake in the SPDC joint venture in Nigeria to the Renaissance consortium, which includes about 520 million barrels of oil equivalent (boe) of gas resources, for $2.8 billion.

After Shell disclosed arrangements to sell its stake, TotalEnergies made the same move to offload interests in the JV seven months later. In addition, Eni confirmed that it had parted ways with Nigerian Agip Oil Company Ltd (NAOC), which was acquired by Oando, Nigeria’s indigenous energy solutions provider.

The region also witnessed oil and gas majors’ appetite for exploration opportunities, with TotalEnergies acquiring a 33% operated stake in Block 3B/4B offshore South Africa and an additional interest in two blocks offshore Namibia.

Furthermore, South American M&A picked up the pace in the first quarter of 2024, with $752 million worth of assets changing hands, following a quiet period of dealmaking as only $790 million was spent in 2023. Petrobras’ divestment halt was identified as the primary cause of the decline.

Based on Rystad’s data, this halt has fueled regional growth opportunities, as Brazilian upstream companies are pursuing alternative expansion plans, with merger negotiations involving four of Brazil’s top ten independents: 3R Petroleum, PetroReconcavo, Enauta, and Seacrest Petroleo. Enauta and 3R Petroleum Óleo e Gás wrapped up their merger last year.

Given the high demand for fossil fuels, Middle Eastern National Oil Companies (NOCs), including ADNOC, Saudi Aramco, and QatarEnergy, are bolstering their gas and LNG portfolios, allowing them to cut emissions and diversify their domestic economies away from a reliance on oil revenues. ADNOC and Aramco are actively exploring further expansion opportunities in the LNG sector, including potential investments in the West.

As a result, both players made acquisition moves in the U.S. While Aramco inked a non-binding heads of agreement (HoA) for equity and offtake from a planned expansion project related to a natural gas liquefaction and export terminal in Southeast Texas, ADNOC signed agreements for LNG offtake and an equity position in the Rio Grande LNG (RGLNG) export project in Texas.

Shortly afterward, the UAE firm also made its first investment in Mozambique for Galp’s 10% interest in the Area 4 concession, opening doors to Mozambique’s Rovuma supergiant gas basin.

Among the biggest business combinations that were completed over the past year are the Harbour Energy – Wintershall Dea acquisition and the Noble Corporation – Diamond Offshore merger. Harbour Energy enriched its oil and gas portfolio in 2024 by completing the $11.2 billion acquisition of Wintershall Dea’s all upstream business assets, bar Russian ones, thanks to the arrangements with the German energy firm’s shareholders, BASF and LetterOne.

Linda Z Cook, CEO of Harbour Energy, commented: “We are extremely proud to have completed the Wintershall Dea acquisition. It marks our fourth and most transformational acquisition since we were founded in 2014, and is another big step forward as we continue to build a large, global independent oil and gas company focused on the safe and responsible production of the oil and gas the world still needs.”

The highlight of the year in the offshore drilling segment comes with the merger completion between two U.S. offshore drilling contractors, which establishes a 41-strong rig fleet. Therefore, the U.S.-headquartered Noble Corporation tucked a new merger milestone under its belt by completing the combination with Diamond Offshore.

The merger between these offshore drillers represents another big consolidation move in the offshore drilling pool against a backdrop of an upcycle that brought higher day rates across all regions and for all rig types.

With the enlarged fleet and strengthened backlog, the latest business combination will open doors to strong commercial opportunities, based on rig owners’ expectations. As these two offshore drillers have become one, the enlarged company now has 41 rigs in its arsenal and a backlog of $6.7 billion.

“We are excited to close this highly strategic and accretive transaction ahead of schedule and commence our integration activities. On behalf of Noble’s board of directors and employees, I would like to welcome the Diamond organization onboard and look forward to our exciting journey ahead as a combined team,” highlighted Robert Eifler, President and Chief Executive Officer of Noble Corporation.

Many energy companies are pursuing further market consolidation by turning to mergers and acquisitions. Canada’s Gran Tierra Energy, which is among these players, decided to get its hands on i3 Energy through a $225.4 million merger.

Gary Guidry, President and Chief Executive Officer of Gran Tierra, explained: “We are thrilled to announce this acquisition, which marks a significant milestone in diversifying our portfolio while strengthening our asset base.

“By integrating these high-quality, operated assets, including low-decline production, large resources in place and a substantial land base, we are not only enhancing our asset base but also aligning with our long-term strategic vision.”

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Moreover, three players, ADNOC Drilling, SLB, and Patterson-UTI, set up the Turnwell joint venture to undertake an initial 144-well program to unlock unconventional oil and gas resources from these wells by Q4 2025 while indicating the potential for ‘thousands’ of wells to be on the horizon in the second phase that may also be accelerated.

Abdulrahman Abdulla Al Seiari, Chief Executive Officer of ADNOC Drilling, elaborated: “The acceleration of the well program is a testament to the innovation, collaboration, and pursuit of excellence that will define our joint venture. 

“Turnwell will not only unlock the immense potential of the UAE’s world-class unconventional energy resources but will also set new benchmarks for the global energy industry. We are proud to lead the way in responsibly shaping the future of energy, both in the UAE and beyond.”

Furthermore, INEOS has taken steps to widen its U.S. deepwater oil and gas acreage by acquiring the Gulf of Mexico business from China National Offshore Oil Corp.‘s CNOOC International, which represents its third large investment in America in the past three years.

While Serica Energy is set on enlarging its portfolio with two additional licenses in UK waters by acquiring a compatriot player, Parkmead, Kosmos Energy was contemplating a potential acquisition of Tullow Oil.

Honeywell has now brought into its fold the LNG process technology and equipment business from Air Products, thanks to a deal valued at $1.81 billion. TotalEnergies recently expanded its gas portfolio by adding more assets offshore Malaysia thanks to the acquisition of interests OMV and Sapura Energy held in SapuraOMV Upstream.

Nebula Energy will pick up the tab for its majority-owned AG&P LNG to become a member of the Australian LNG club by acquiring Venice Energy, which is developing an import terminal project in South Australia, described as the world’s first floating LNG (FLNG) import terminal envisioned to be powered by 100% renewable energy.

Woodside Energy added Tellurian to its portfolio and took over the U.S. firm’s proposed LNG terminal in Louisiana, United States, for which it is targeting final investment decision readiness for Phase 1 from the first quarter of 2025.

In addition, Helmerich & Payne‘s move to acquire KCA Deutag is another example of further market consolidation. With a price tag of almost $2 billion, the business combination boosts rig fleet, global onshore drilling position, and footprint and exposure in America and the Middle East, seen as two of the biggest oil and gas-producing regions.

Some oil and gas players have seen opportunities for growth in combining their assets in a particular country to make the most of their portfolio in that region by establishing a joint venture company. To this end, Shell and Equinor have laid the groundwork on a quest to combine their offshore oil and gas assets in Great Britain, with the aim of creating the largest independent oil and gas player in the UK North Sea.

The merger encompasses 12 offshore fields and a range of exploration licenses on the UK Continental Shelf. However, Equinor will retain ownership of its cross-border assets and its offshore wind portfolio, alongside the hydrogen, carbon capture and storage, power generation, battery storage, and gas storage assets.

Shell will also keep its ownership interests in the Fife NGL plant, St Fergus Gas Terminal, and floating wind projects under development while remaining the technical developer of a project described as Scotland’s largest carbon capture and storage undertaking.

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BP and ADNOC Group, through XRG, have established Arcius Energy, bent on bringing to life a new regional gas platform, which will first focus on gas developments in Egypt. A few months ago, Eni joined forces with Ithaca Energy for upstream activities, thus becoming Britain’s second-largest oil and gas independent operator. The new entity will hold stakes in six of the ten largest fields and the top two largest undeveloped fields on the UK Continental Shelf (UKCS).

The duo sealed the deal to combine the Italian energy giant’s upstream assets in the UK, excluding East Irish Sea ones and CCUS activities, with the North Sea operator’s portfolio, which is expected to allow them to strengthen their presence on the UK Continental Shelf.

Eni’s upstream assets in the UK waters are now part of Ithaca Energy, thus, the latter’s expanded portfolio holds stakes in six of the ten biggest fields and the two largest undeveloped assets on the UK Continental Shelf.

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Oil and gas companies have taken advantage of asset swap deals to bolster their main production and exploration hubs while offloading non-core assets. Woodside Energy and Chevron have embarked on a deal to exchange interests in core areas of operations and focus on strategic assets within the oil, gas, liquified natural gas, and carbon capture and storage domains in Western Australia.

OKEA and DNO have made similar arrangements to swap stakes in two prospects offshore Norway, which are on the drilling lists of rigs owned by Odfjell Drilling and Transocean, respectively. Two more Norwegian oil and gas players, Equinor and Petoro, have sealed a value-neutral asset swap agreement for multiple assets in the Haltenbanken area on the Norwegian Continental Shelf (NCS).

Kjetil Hove, Equinor’s Executive Vice President for Exploration and Production Norway, sees the alignment of ownership around the larger production hubs as “important enablers for long-term value creation.”

The majority of Hess Corporation‘s shareholders have voted in support of its proposed merger with Chevron amid arbitration claims brought forward by the company’s partners in the Stabroek block offshore Guyana, ExxonMobil Guyana and CNOOC, which filed cases before the International Chamber of Commerce to seek a right to a first refusal over any sale of the U.S. firm’s 30% interest in the oil-rich offshore block under the existing joint operating agreement.

The duo’s business combination plans passed the Federal Trade Commission (FTC) antitrust review. However, Hess’ Chief Executive Officer (CEO) was prohibited from joining the U.S. oil major’s board on the grounds of his alleged communications with global competitors, such as the OPEC cartel.

The completion of the merger remains subject to closing conditions, including the satisfactory resolution of ongoing arbitration proceedings, which ExxonMobil and CNOOC decided to file before the International Chamber of Commerce.

This arbitration revolves around preemptive rights in the Stabroek block joint operating agreement, as the duo is convinced they have a right to a first refusal over any sale of Hess’ 30% interest in the oil-rich offshore block in Guyana. The list of ExxonMobil’s six projects in this country includes Liza Phase 1 and Phase 2, Payara, Yellowtail, Uaru, and Whiptail. 

Steps are also being taken to get the required approvals for Hammerhead as the seventh deepwater oil project in Guyana, which will add between 120,000 and 180,000 barrels per day (bpd) by 2029, raising the country’s overall production capacity bar to nearly 1.5 million bpd.

While both Chevron and Hess Corporation have welcomed the green light from the Federal Trade Commission (FTC) regarding the antitrust review of their proposed merger, neither supports the FTC’s allegations concerning Hess’ CEO and his previous communications with global competitors such as OPEC cartel, but they still agreed he will not join the oil major’s board.

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The ongoing arbitration process, which Hess’ Stabroek block partners have brought into play regarding preemptive rights for the assets offshore Guyana, is keeping everyone on their toes, as its outcome remains an unknown factor that could derail the proposed merger.

Some potential business combinations are still in the early stage of being contemplated, while rumors about others are yet to be confirmed. In line with this, Bumi Armada is considering a business combination with the offshore segment of Malaysia’s MISC Group (MISC).

As Transocean is now reportedly contemplating a business combination with Seadrill, this would create a fleet of 49 rigs. While the former owns or has partial ownership interests in and operates a fleet of 34 MODUs, including 26 ultra-deepwater floaters and eight harsh environment floaters, the latter operates 15 MODUs, covering 12 drillships, one niche semi-sub, and two harsh environment units.

Industry sources also indicate that a Valaris–Seadrill merger may also be possible along with acquisitions of smaller players into floating rig giants’ fleets.

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Navigating shifting tides across oil, gas, and drilling environs comes with its unique set of challenges and opportunities. While these tides can be unpredictable, moving both in favor and against fossil fuel projects at times, as the winds of change become stronger, the oil and gas industry, alongside the offshore drilling sector and rig markets, is adapting to the shifts in the offshore energy landscape.

The enduring vision of ushering in a low-carbon and even carbon-free world is not in danger of fading out as business as usual now entails the pursuit of more hydrocarbons alongside decarbonization tools and energy transition enablers.

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