Rystad Energy, an energy consultancy firm, recently published a report that indicates M&A deal-making in the oil and gas industry has dampened when compared to the first six months of last year. Donald Trump’s policies and other macroeconomic uncertainties have contributed to this slump, although it can also be argued that the slowing down of deal-making activity at this time is only natural after the frantic merger and acquisition deal-making that happened during the past 24 months.
According to the report, the total value of the deals completed shrunk by approximately 33% to reach $82 billion during H1 of this year in comparison to figures for the same period last year. This slowing down was largely a result of dwindling deal activity within the North American region. In 2024, M&A deals in the region accounted for 70% of the world’s total in H1 but this has now dropped to 51%.
The report explains that there was heavy deal-making during the previous two years and that consolidation within the sector could partly explain the reported loss of steam during the past six months. However, President Trump’s trade policies, coupled with geopolitical tensions, also played a part in putting the brakes on deal-making as a result of the volatility that was created by those tensions.
The significant swings in oil prices have created a widening gap between sellers and buyers. This is because the changing market conditions make negotiations more difficult given that sellers often table higher demands when an upswing in prices occurs, and then when a downswing happens, buyers demand greater concessions. As a result, negotiations tend to take longer and many deals end up being put on hold until there is more certainty to back any decisions made.
To show how impactful these price swings have been on deal-making, the report gives the example of the Eagle Ford area in Texas that saw 75% of the potential deals under negotiation being shelved primarily because of the immense volatility that occurred during Q2 of this year.
The report asserts that the market for M&A is active, but the overriding driver now is that deals cannot be completed because external market conditions are exerting a lot of influence on proceedings and participants are opting to be cautious. Triggers aren’t being pulled at the moment until market conditions gain some stability.
The slowing down of M&A activity doesn’t mean the sector is going quiet. On the exploration and production front, firms are going full steam ahead. Entities like GEMXX Corp. (OTC: GEMZ) possibly regard this period as a time to ramp up their exploration activity so that when stability returns on the macroeconomic front, they are well positioned to benefit.
NOTE TO INVESTORS: The latest news and updates relating to GEMXX Corp. (OTC: GEMZ) are available in the company’s newsroom at https://ibn.fm/GEMZ
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