The rising tide of post-Covid dealmaking is lifting all ships, even the market laggard oil and gas sector. M&A is up in volume and value over the year ago period, with a larger amount anchored by two large internationally-driven deals, a recent S&P Global Market Intelligence report reasons. Let’s take a look at the move and drivers of the uptick.

Petrobras Gas’ sale of a majority stake in Gaspetro to Compass Gas e Energia SA for $9.2 billion and the $8.8 billion merger of Santos and Oil Search led the sector to $21.1 billion in aggregate deal value in the second quarter. Despite anecdotal interest in blockbuster transactions, asset sales fell in both volume and deal value in 2Q.

Energy could be a logical candidate for consolidation on the opposite end of the dealmaking pendulum driving M&A elsewhere—rather than chasing additional revenue, buyers might be interested in scale to reduce costs in a low growth environment. Remember that the S&P Global Energy index lags the S&P 500 2.6 percent year to date, and 6.2 percent in the last three months.  “Equity markets are sending a very clear signal to all oil and gas companies not to over spend and chase volume growth,” wrote Credit Suisse analysts in a note earlier this month following Chevron (NYSE: CVX) CFO Pierre Breber’s roadshow. “Volume growth is not a goal.”

Perhaps dealmakers are listening? A rebound off Covid-induced abnormally low M&A levels could take time to return to normal levels.

 Brandon Zero