Apr 23 2024: According to data provider Enverus, U.S. oil and gas mergers and acquisitions (M&A) reached a record $51 billion in the first quarter, continuing the momentum from a robust merger pace in 2023, particularly in the top U.S. shale field.
Energy firms have been eager to expand their oil and gas drilling portfolios, with a focus on the Permian Basin in West Texas and New Mexico, where breakeven costs for producers are around $64 per barrel. Oil prices averaged approximately $77 per barrel last quarter and are currently trading near $83 per barrel.
Andrew Dittmar, Enverus Intelligence Research’s principal analyst, noted that the Permian Basin, with its high-quality drilling prospects, continues to drive M&A activity in the oil and gas sector.
The largest proposed acquisition in the last quarter was Diamondback Energy’s $26 billion bid for Endeavor Energy Partners, emphasizing the consolidation trend among Permian-centric drillers. Other notable deals included Apache Corp’s $4.5 billion acquisition of Permian oil competitor Callon Petroleum and Chesapeake Energy’s $7.4 billion deal for Southwestern Energy in April.
However, some major acquisitions, such as those by Exxon Mobil and Chevron last year, are facing delays due to antitrust reviews, particularly as they concentrate assets in key shale fields like the Permian and Haynesville.
Enverus calculates that 60% of the first quarter’s M&A transactions by value were in the Permian Basin, highlighting its significance in driving industry consolidation.
Dittmar mentioned that while the M&A pace was high in the first quarter, it may not be sustainable, as strong oil prices incentivize companies to retain non-core drilling assets instead of divesting them as they did previously.
“Inventory scarcity is a key theme among exploration and production companies,” he added.
