• Trump could streamline antitrust reviews
• PE capital might flow more under Trump
• Permitting under Harris could lead to small-cap M&A

The possibility of a second Donald Trump administration is generally seen as a good development for the oil and gas sector, but a Kamala Harris government might inadvertently lead to more industry consolidation, according to industry sources.

Trump could streamline approvals for oil and gas deals and projects, a shift from the Biden administration’s close scrutiny of upstream deals which has been perceived by some as politically-motivated. The “atmosphere” for dealmaking would be easier if Trump were elected because under Biden “the FTC (Federal Trade Commission) has been really a complication,” said Jack Langlois, an energy partner at law firm McDermott, Will & Emery.

If elected, Trump would likely replace Lina Khan as chair of the FTC with someone friendlier to the oil and gas industry.

A fresh face at the helm of the FTC could open additional possibilities, said Dan Pickering, chief investment officer at Pickering Energy Partners. If today’s largest public oil companies were to consider merging with one another, that prospect would be substantially easier with a Republican FTC, Pickering said, especially if the companies don’t have significant downstream overlaps.

“I don’t think any of these deals are waiting on [the election] but they would certainly be easier,” he said.

There have been 24 upstream M&A deals in the US year-to-date for a total deal value of USD 77.2bn, up from USD 36.4bn in the same period in 2023, according to Mergermarket data.

Khan’s FTC has initiated a second request in at least six recent major oil and gas deals, with five of them still pending. In ExxonMobil‘s [NYSE: XOM] acquisition of Pioneer Natural Resources the FTC barred Pioneer CEO Scott Sheffield from serving on Exxon’s board.

But despite enhanced scrutiny, Khan’s FTC has yet to block or fight any major energy transaction in court. In fact, in its approval of the Exxon/Pioneer deal, the agency found that crude oil is a global market, which would make it very difficult to successfully challenge any upstream deal in the future based on overlaps in the US alone, an antitrust lawyer told Mergermarket in June.

Sector advisors have gotten used to extensive reviews of oil and gas deals under Joe Biden’s administration. “The political environment makes it harder, but not impossible, just a little more cumbersome,” said Pickering, adding that he expects “more of the same” if Kamala Harris is elected in November.

However, tough regulatory scrutiny could still apply in some subsectors, regardless of who wins November’s presidential election.

Mergermarket reported in July that antitrust markets in oilfield services deals such as ChampionX/SLB will be viewed more narrowly and concretely than upstream markets.

Oilfield services deals have been challenged by Democratic and Republican administrations alike. In 2016, Barack Obama’s administration sued to block Baker Hughes‘ [NASDAQ:BKR] merger with Halliburton [NYSE:HAL], with the companies ultimately abandoning the deal. A year later, Trump’s Department of Justice challenged the merger of GE’s oil and gas unit with Baker Hughes. The deal closed in 2017.

PE money to flow under Trump

A Trump administration could result in more private equity capital flowing into the upstream sector, said Jibin Luke, a Houston-based partner focused on energy at McDermott, Will & Emery. “I think there will be more money that comes off the sidelines,” he said.

Mergermarket reported in July that PE firms are preparing to double down on the oil and gas sector, either through new funds or continuation vehicles, as the need for capital increases amid heightened dealmaking and stable crude prices.

PE firms could look for creative ways to invest in the industry despite ESG requirements from their LPs, said Langlois. “We are seeing the funds come back in, but they’re coming back in an indirect way,” he said.

That could include investing in mineral rights and leasing those to companies that do on-the-ground production, so the sponsor is essentially an owner of real estate and not technically an oil producer, he explained.

Pickering said he expects to see PE investments flowing into non-core divestitures from large public companies.

Mergermarket’s latest North America Natural Resources Trendspotter reported that oil and gas M&A is expected to see a reversal of asset flow in 2H24 and into 2025, with the large strategics looking to offload non-core assets as they integrate large acquisitions.

Drill, baby, drill

Trump could also issue faster permits and leases for drilling on federal lands – a welcomed development for the industry.

“I don’t think the challenges are going to stop. But does a Republican administration alleviate some of those, or help to try and push through some of the pipelines? I think probably yes,” said Kyle Mork, CEO of upstream and midstream company Greylock Energy.

Harris recently noted in a CNN Interview that she no longer supports a ban on fracking.

Easier permitting, however, might detract for the need to consolidate. “If there are more places to do things, maybe you don’t need to consolidate as aggressively if you can go lease and drill as opposed to buy and drill,” Pickering said, although he added that would likely apply only to small deals.

Indeed, if a Harris administration continues to restrict drilling on federal land that could increase the need for consolidation, said Jace Graham, founder and CEO and founder of Rising Phoenix Resources, a company that acquires and manages mineral rights, oil and gas royalties, and non-operating assets. “We would make more money when a Democrat is in office due to restrictions on drilling and development,” Graham said.

Federalism at play

But regardless of what federal land permitting looks like, oil and gas companies must still deal with state regulators.

State-level regulations are the most important for Gabriel Rio, CEO of Milestone Environmental Services, a Houston-based environmental services infrastructure company. “I don’t believe the presidential election is going to have a huge impact on Texas,” he said. “Most of the regulations and the activity that matters happens at the state level.”

For upstream and midstream operations, most of the permitting also takes place at the state level, said Mork. “It’s not necessarily directly impacted by what happens at the federal level or a change in administration,” he said.