World oil
Enverus Intelligence Research (EIR), a
subsidiary of Enverus, is releasing its summary of 1Q2025 upstream M&A
activity and outlook for the rest of the year. The M&A summary follows Enverus'
release of Investor Analytics, a new cutting-edge solution designed to offer
investors a comprehensive view of key market dynamics.Upstream M&A opened
2025 with $17 billion in deal value, the second-best start to a year since
2018. However, activity was disproportionately driven by one company,
Diamondback Energy. Buyers were already feeling the pressure of limited
acquisition opportunities and high asking prices for undeveloped drilling
inventory.
"Upstream deal markets are heading into
the most challenging conditions we have seen since the first half of 2020. High
asset prices and limited opportunities are colliding with weakening
crude," said Andrew Dittmar, principal analyst at EIR. "Potential
sellers are acutely aware of the scarcity of high-quality shale inventory,
creating a reluctance to unload their assets at a discount. Buyers on the other
hand were already stretched by M&A valuations and can't afford to continue
to pay recent prices now that oil prices are lower." Prior to OPEC and
tariffs creating waves in oil markets, pricing for quality shale inventory was
a perpetually rising tide. Diamondback set a record in the Permian Basin with
its acquisition of Double Eagle IV. The private equity sponsored E&P was
able to garner such a large premium for its land because high consolidation
over the last few years has left few attractive private companies for the
public E&Ps to target. A potential bright spot for M&A is natural gas
with significant interest in adding assets with access to Gulf Coast markets
from multiple buyer groups, including international buyers and private capital.
While near-term gas prices are also being challenged in the broad market
selloff, future prices still look strong with a secular shift in demand from
liquified natural gas export facilities and secondary demand from datacenters
Using Enverus newest AI tool, Investor
Analytics, to summarize comments about M&A markets from management teams in
recent earnings calls reveals companies were already concerned about the asking
prices for deals and available opportunities.
"Volatility and lower prices make deals
tough right now but will create opportunities for nimble buyers with a
longer-term outlook," said Dittmar.