Houlihan Lokey – Oil gas industry update, 4Q 2023

In the fourth quarter of 2023, there were several multi-billion dollar global transactions announced in the oil and gas industry. This included deals between ExxonMobil and Pioneer Natural Resources, Chevron and Hess, Harbour and Wintershall Dea, Occidental and CrownRock, and TGNR and Rockcliff Energy. Additionally, there were numerous small and mid-cap transactions announced and closed in various regions around the world. This continued activity in M&A transactions was encouraging for industry participants, especially considering the commodity price volatility that persisted in the fourth quarter. Factors contributing to this volatility included global daily production of crude oil and natural gas, post-Russia trade flows, production constraints imposed by OPEC+, and global conflicts. Despite these challenges, there was also improvement in capital markets activity within the oil and gas sector, with new high yield debt issuances and equity IPOs being seen. These trends are indicative of a positive outlook for the industry both operationally and in terms of investment return. In terms of oil supply and demand dynamics, benchmark prices declined in response to various factors such as OPEC+ production cuts and shipping disruptions in the Red Sea. The US saw record crude production and exports, while China's crude imports declined. Natural gas prices in the US declined significantly due to strong domestic production and warm winters. US LNG exports reached a record high, making the country the largest global exporter. Despite continued global demand, there are concerns about the Biden Administration slowing down LNG facility permitting and construction. In the M&A and divestiture markets, there is a high level of interest in transacting, with previously stalled deal processes being revived. Mega deals are also accelerating, with most recent deals being all-stock transactions at modest premiums.