According to consulting firm Ernst & Young, 2012 was a record year for merger and acquisition activity within the oil and gas industry. The industry tallied $402 billion of deals, which easily surpassed the previous record of $393 billion set in 2010. It was also well above 2011 levels, which saw $337 billion in deals closing. 

Looking ahead, the company sees reasons for continued optimism for M&A in 2013. It noted that stability in the price of oil when combined with a recovering banking sector should help the deals keep flowing. The firm also thought that oilfield service companies were likely to see more M&A activities including joint ventures and business combinations. Given that outlook, what are some of the major players that investors should be watching over the coming year?

The sellers
In 2012, Chesapeake Energy (OTC:CHKA.Q) was an active seller ,adding $12 billion to the year's M&A total. It has already announced plans to sell another $5 billion to $7 billion in 2013. It's looking to sell a portion of its non-core assets in the Eagle Ford Shale while planning a joint venture or outright sale of a portion of its leasehold acres in the Mississippi Lime. The company continues to refocus on its core assets, and until it can fund drilling through cash flow, it needs to sell assets to make ends meet. 

Joining Chesapeake in selling more than $10 billion in assets over the past year is ConocoPhillips (NYSE:COP). The company has already gotten a jump start on this year's program as it just announced another billion-dollar deal. The company expects to finish up its multiyear asset disposition program by the end of this year. 

Sellers are motivated for a variety of reasons, and these two had very different reasons to sell assets. Chesapeake needed to cut its debt and fund its liquid drilling program, while ConocoPhillips wanted to transform the company by optimizing its portfolio to create value for investors. Expect many more deals over the coming year, with balance sheet repair to bridge a funding gap being the most likely reason to motivate an asset sale.

The buyers
One company that's definitely on the prowl is Linn Energy (OTC:LINEQ). Last year, the company closed $2.8 billion of acquisitions and joint ventures of mature oil and gas assets. On its last conference call, management foresaw an acquisition market stronger than its seen before. The company sees between $20 billion and $30 billion of mature oil and gas assets coming available over the next 18 months. Look for Linn to acquire at least $3 billion of assets over the next year as it continues its growth-by-acquisition strategy. 

Given Ernst & Young's outlook that the oilfield services industry is likely to be active, I wouldn't be surprised to see some action there, especially internationally. I could easily see Halliburton (NYSE:HAL) or Baker Hughes (NYSE:BHI) making a deal to bolster international revenue. Both see more than 50% of revenue weighted to North America, which is pressured by a slowdown in drilling activity and an oversupplied pressure pumping market. 

Baker Hughes sees strength in the Gulf of Mexico while expecting big things from its Middle Eastern operations. It, like Halliburton, could benefit from boosting those operations further through either a joint venture or acquisition. I'd see a deal that bulks up deepwater drilling operations as being the most likely to come to pass.

The Foolish bottom line
It looks like 2013 will be a busy year for energy investors. With expensive drilling programs needing to be funded, we'll likely see even more asset sales and joint ventures over the coming year. At some point it's very likely that we'll see a major merger in the oil patch, but those are tough to predict.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.