Big energy mergers haven't led to increase in oil and gas production

The spate of mergers and acquisitions in the oil business has produced a handful of mega majors with a basic problem -- they have trouble producing more oil.
This embarrassing difficulty comes despite spending huge sums, according to Matt Simmons, chairman and CEO of Simmons & Company International.

Companies such as ExxonMobil, Shell, BP and Total have spent $ 150 bn since 1999 trying to find more oil and gas but have relatively little to show for it, Simmons said. This is despite promises to Wall Street that getting bigger would result in more oil. Lately, one of the executives with the majors has basically said this is no longer a goal.
"Somehow, the money never makes it to the drill bit," Simmons told. Also, the giants seem less interested in research that can lead to new technology, a task that now falls on the three largest oil-field service companies.

While not being critical of the mega majors, or even saying that mergers and acquisitions were a bad thing, the numbers speak for themselves, he said. Consolidation has been a fact of life in the industry since John D. Rockefeller, he said. In the case of the oil-field services industry, it allowed companies to survive a years-long stretch of bad times. Businesses such as Nabors and Weatherford became big, diverse firms during that period.
There was close to a decade of transactions where virtually no money changed hands, said Simmons. In contrast, growing internally takes three to five times as long as buying and carries multiple risk factors. Simmons & Co. is an energy investment banking firm that specializes in those kind of transactions.

An extraordinary amount of consolidation has also taken place in refining and marketing, where 92 % is now owned by only 20 companies. This is not surprising since returns in the downstream sector have been meagre. Has it finally come to an end?
Simmons noted there are many construction and subsea companies working offshore that are targets for acquisition, plus there are too many small and medium-size exploration and production companies. "Each transaction stands or falls on its own merit," he said.