2023 has kicked off with a flurry of M&A activity, including Cactus, Inc.’s $621 million acquisition of FlexSteel Technologies Holdings, Inc. The all-cash deal “[e]nhances Cactus position as premier provider of highly engineered equipment to the exploration & production (E&P) industry,” according to the companies’ joint press release, by acquiring “a leading manufacturer and provider of differentiated onshore spoolable pipe technologies and associated installation services.”
Cactus and FlexSteel hope to capitalize on the boom in onshore oil and gas production. The U.S. Energy Information Administration forecasts that U.S. oil production will hit record levels next month. This marks a full recovery from the drop production in 2020 as oil prices plummeted – prices even reached negative values as producers struggled to find places to store the glut of crude that was being left unused as the world reeled from the covid-19 epidemic.
When the lockdowns lifted in the last half of 2020, the U.S. and other economies boomed, sending oil prices higher due to increased demand and rising inflation. Prices were driven even higher when Russia invaded Ukraine in 2022, with Western nations’ bans on Russian oil reducing supply from the world’s third largest producer.
U.S. oil production has proven triumphant in the face of these many shocks. The nations’ oil production had suffered from a 30-year decline from 1970s until the 2000. According to Robert Weiner of The George Washington University, “The United States was in steady decline. This was basically because [the U.S. had] been drilled out.” In the mid 2000s, the producers began using hydraulic fracturing, creating “Shale Revolution” that produced an enormous spike in production as producers could now extract vast amount of oil that had been trapped underground. The U.S was catapulted to the top oil producer in the world, pumping the equivalent of 20% of the world supply. Cactus touts “a presence near every major U.S. shale basin” and seeks to utilize this acquisition to further increase its footprint.
Distribution of onshore and offshore crude oil production worldwide from 2005 to 2025
According to Matterhorn’s M&A database, which tracks publicly-announced deals over $25 million in value, Cactus, Inc. is advised by law firm Bracewell LLP and financial adviser J.P. Morgan Securities LLC. FlexSteel is advised by Vinson & Elkins LLP and financial advisers Morgan Stanley & Co. LLC and Piper Sandler & Co.