The first quarter of the year witnessed a historic surge in U.S. oil and gas mergers and acquisitions, reaching an unprecedented $51 billion, continuing the momentum from the intense merger activity of the previous year, as reported by data provider Enverus. This surge was predominantly concentrated in the prominent U.S. shale field, particularly the Permian Basin in West Texas and New Mexico, where energy companies have been aggressively expanding their oil and gas drilling inventories. With break-even costs for producers hovering around $64 a barrel, the region has attracted significant attention, especially with oil prices averaging about $77 a barrel last quarter and currently trading near $83 per barrel.
Andrew Dittmar, principal analyst at Enverus Intelligence Research, highlighted the Permian Basin’s significance, stating that it comes as no surprise that it continues to drive M&A activities within the oil and gas sector, given the abundance of high-quality drilling prospects in the region.
Notable among the quarter’s acquisitions was Diamondback Energy’s $26 billion bid for Endeavor Energy Partners, a move that unites two prominent Permian-centric drillers. Additionally, Apache Corp’s $4.5 billion deal for Permian oil rival Callon Petroleum, and Chesapeake Energy’s $7.4 billion acquisition of Southwestern Energy in April, contributed to the period’s most valuable deals.
However, challenges such as antitrust reviews have stalled certain significant acquisitions, including those by Exxon Mobil and Chevron, due to their concentration of holdings in the Permian or Haynesville shale fields, according to Dittmar. While the approval of these deals is anticipated, federal regulatory oversight may present obstacles to further consolidation within a single play.
The first quarter saw a rise in the number of deals to 27, compared to 20 in the same period the previous year, with 60% of the transactions by value centered in the Permian, according to Enverus. Dittmar noted that while the high pace of M&A activity is unlikely to persist, the current robust oil prices have enabled companies to justify retaining non-core drilling assets rather than divesting them, reflecting the prevailing theme of inventory scarcity among exploration and production companies.