Weak oil costs, restricted shale acreage to hit vitality M&A in 2025, Enverus says

By Georgina McCartney

HOUSTON (Reuters) -The U.S. upstream oil and gasoline M&A market is bracing for probably the most difficult circumstances for the reason that COVID-19 pandemic as oil costs droop and prime acreage dries up, analytics agency Enverus stated on Wednesday, despite the fact that dealmaking jumped final quarter to the second-best begin to the yr since 2018.

The anticipated downturn in mergers and acquisitions follows a sequence of blockbuster takeovers by oil and gasoline majors lately, which culminated in a file $192 billion price of offers carried out in 2023.

There have been $17 billion price of offers disclosed within the quarter ended March 31, however exercise was disproportionately pushed by Diamondback Power, which accounted for nearly half of whole worth, stated Enverus Intelligence Analysis principal analyst, Andrew Dittmar.

Diamondback Power acquired Double Eagle IV within the Midland basin for $4.083 billion in February. It additionally offered minerals to Viper Power for $4.26 billion in January, the 2 largest offers carried out within the first quarter.

Outdoors of Diamondback, consumers had been already feeling the stress of restricted acquisition alternatives and excessive asking costs for undeveloped drilling stock, Dittmar stated.

“Upstream deal markets are heading into probably the most difficult circumstances we’ve seen for the reason that first half of 2020. Excessive asset costs and restricted alternatives are colliding with weakening crude,” he added.

West Texas Intermediate crude futures tumbled to multi-year lows this month after U.S. President Donald Trump unveiled commerce tariffs on April 2, stoking issues of an financial slowdown.

Eight OPEC+ international locations additionally unexpectedly agreed to advance plans to part out oil output cuts by growing output by 411,000 barrels per day in Could.

Sellers are conscious there’s a shortage of high-quality shale stock, making them reluctant to unload their belongings at a reduction, however consumers can’t afford to pay latest M&A costs now that oil costs are decrease, Dittmar stated.

“The standoff between these two teams round truthful asset pricing is about to sink M&A exercise,” he stated.

Different main offers carried out included Paloma Pure Fuel promoting Haynesville belongings in February to an undisclosed purchaser for $1.2 billion.

U.S. pure gasoline producers and funding companies are gearing up for extra exercise in Louisiana’s Haynesville shale basin, positioning themselves for a increase in liquefied pure gasoline exports boosted by new approvals from Trump.

(Reporting by Georgina McCartney in Houston; Enhancing by Liz Hampton and Nia Williams)