By: JEREMY OSTERBERGER, President and COO, BIC Alliance

Confidence is surging in the O&G sector following the results of the 2024 presidential election. Although President-elect Donald Trump has yet to officially begin his second term, his remarks during the campaign and after the election indicate a future characterized by eased regulations and favorable policies for the O&G industry. This outlook is fueling optimism, which could lead to increased capital flow and heightened M&A activity.

One of the central goals on the President-elect’s campaign website is the commitment to “unleash the production of domestic energy resources.” Trump further emphasized the need for curbing environmental regulation for energy prosperity during his appearance on the Joe Rogan Experience podcast.

An analysis by S&P Global provides insight into the implications of Trump’s second term for various commodities. Regarding natural gas production, the analysis suggests that Trump is likely to roll back or loosen U.S. methane capture regulations, thereby reducing production costs for drillers. He has also pledged to expedite permitting for gas pipelines through executive action. For midstream natural gas producers, Trump has promised to eliminate permitting hurdles and issue a national emergency declaration to facilitate increased production. On the petrochemical front, he intends to scale back climate initiatives and reduce the budgets of regulatory agencies, including the EPA. This analysis paints a clear picture of a more favorable regulatory environment for stakeholders across the O&G sector.

Regardless of the specific policies or deregulations implemented by the new administration, Trump’s election has instilled confidence in investors, encouraging them to utilize previously idle capital and pursue acquisition opportunities within the sector. The positive outlook for O&G is expected to attract substantial investment, potentially rivaling the record quarterly total of $51 billion in deals observed in Q1 2024. Both buy-side and sell-side firms have a promising four-year window to execute strategic transactions. Notably, some of these deals may progress more swiftly under Trump’s leadership. As reported by the Washington Post, during a May 2024 fundraiser in Houston, Trump suggested to oil executive donors that he could ease Federal Trade Commission scrutiny of industry M&A.

“Regardless of the specific policies or deregulations implemented by the new administration, Trump’s election has instilled confidence in investors, encouraging them to utilize previously idle capital and pursue acquisition opportunities within the sector.“

Over the next four years, we may also assess the commitment of energy companies to ESG investments, independent of government incentives. The Inflation Reduction Act’s (IRA) tax credits, such as the Clean Fuel Production Credit, have provided O&G companies with financial incentives to explore renewable energy. However, Trump has indicated his intention to eliminate any unspent funds under the IRA, which could lead to the rollback of these tax credits. If this occurs, energy executives may reconsider their investments in renewables. The number of green M&A deals closed in the coming years will indicate whether the motivation for such investments stems primarily from internal corporate strategies or external pressures.

For Trump, enhancing the economy — a core message throughout his campaign—is intrinsically linked to energy independence. During a campaign event in the Bronx, a constituent asked Trump how to revitalize the economy. Trump’s response underscored his view: “Number one, it all begins with the oil.” His confidence in the sector’s potential to bolster economic growth sets the stage for a productive four years ahead.

For more information call Jeremy Osterberger at (281) 538-9996.