Deloitte’s oil and gas industry outlook for 2025 forecasts that the Trump presidency will facilitate continued consolidation in the U.S. oilfield services sector next year.
The oilfield service sector is already consolidating, with a slew of megadeals in exploration and production this year which palpably shrank the client pool for oilfield service providers. “When customers combine, you might have a guy who was running seven rigs, and a guy who was running five rigs, that adds together to 12. But when they come back, they run 10,” Chris Wright, chief executive of Liberty Energy and Trump’s pick for Energy Secretary, told Reuters back in July when the megamergers began to really hit oilfield services.
The consolidation trend, according to Deloitte, is set to intensify under Trump, who has promised to make life a lot easier for the oil and gas industry as a whole by relaxing various regulations.
The consultancy reported that the value of deals in the oilfield service sector over the first nine months of this year reached $19.7 billion. This was the highest deal value since 2018, the firm said, as quoted by Reuters.
“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,” John England, Deloitte’s global sector head for oil, gas, and chemicals, told Reuters.
Not all mergers and acquisitions, however, are driven by a desire to consolidate. For many oilfield service independents, it has become the only path to survival. “Many competitors are extremely consolidated in their work profile and customer base,” one industry executive told the Dallas Fed for its quarterly energy survey earlier this year.”
“As consolidation occurs, often the acquiring company will not pick up the existing service companies. Once cut loose, these companies are searching for a lifeline and in many instances willing to work for negative margin rates, doing whatever they can to put money toward fixed period costs.”
By Irina Slav for Oilprice.com
Energy News Beat