A Real Economy publication

Energy industry outlook

Feb 15, 2024

Key takeaways

Oil and gas businesses are poised to continue the consolidation wave trend into 2024.

Energy companies are increasingly adopting analytical AI technologies, including machine learning.

Tech infrastructure, data strategy are key in future of industrial automation.

Energy sector trend #1: Navigating oil and gas consolidation

The oil and gas sector has experienced a remarkable surge in merger and acquisition activity recently, with over $155 billion in deals in the fourth quarter of 2023, according to Bloomberg. That’s more than the prior five quarters combined. Faced with challenging market and economic conditions, oil and gas companies—particularly upstream, midstream and oil field services companies—are poised to continue this consolidation wave into 2024. Middle market companies are especially likely to be involved in this M&A activity, so it is crucial for them to proactively position themselves for strength in this cycle. 

Deals that do occur will require special attention to valuation, as deal types and conditions in the oil and gas ecosystem vary widely. In the last couple of years, we saw companies with atypical spending and contract terms that companies—buyers and sellers alike—will need to analyze and model as part of the valuation for any deal. 

Energy sector trend #2: The rise of artificial intelligence

Energy companies are increasingly turning to AI technologies, including machine learning, to address challenges and seize opportunities in the evolving energy sector. These AI solutions are being applied across various areas, from industrial operations and environmental monitoring to business process improvement and safety enhancements. Key use cases include optimizing production processes, monitoring emissions, enhancing safety, and improving customer experiences.

Companies are also investing in AI-focused training programs to upskill their workforce and using AI in customer service to provide personalized experiences. These AI solutions have become a strategic priority in the energy sector, with many companies exploring their use through pilots and full-scale adoption.

Energy sector trend #3: IoT risk management

Amid rising production costs and supply chain challenges, industrial organizations are driven to enhance efficiency and productivity through technology, particularly operational technology (OT) and industrial Internet of Things (IIoT) capabilities, which offer new opportunities but also pose risks. The remainder of 2023 and beyond will see enhanced data access and utilization playing a crucial role in achieving organizational success.

RSM contributors