US oil and gas deals slowing after record 1Q: Enverus

US oil and gas sector mergers will likely slow for the rest of the year following a record $51bn in deal in the first quarter, according to consultancy Enverus.

Transactions slowed in March and the second quarter appears to have already lost momentum, according to Enverus, following the year-end 2023 surge in consolidation that spurred an unprecedented $192bn of upstream deals last year.

The Permian shale basin of west Texas and southeastern New Mexico continued to dominate mergers and acquisitions, as companies competed for the remaining high-quality inventory on offer. Acquisitions were led by Diamondback Energy's $26bn takeover of closely-held Endeavor Energy Resources. Others include APA buying Callon Petroleum for $4.5bn in stock and Chesapeake Energy's $7.4bn takeover of Southwestern Energy.

The deal cast a spotlight on the remaining private family-owned operators, such as Mewbourne Oil and Fasken Oil & Ranch, which would be highly sought after if they decided to put themselves up for sale.

"However, there are no indications these closely held companies are looking to exit any time soon," said Andrew Dittmar, principal analyst at Enverus. "That leaves public explorers and producers (E&P) looking to scoop up the increasingly thin list of private E&Ps backed by institutional capital and built with a sale in mind — or figuring out ways to merge with each other."

Deals including ExxonMobil's $59.5bn takeover of Pioneer Natural Resources, as well as Chevron's $53bn deal for Hess, have attracted the attention of anti-trust regulators. The Federal Trade Commission has also sought more information on the Chesapeake/Southwestern deal.

"The most likely outcome is all these deals get approved but federal regulatory oversight may pose a headwind to additional consolidation within a single play," said Dittmar. "That may force buyers to broaden their focus by acquiring assets in multiple plays."

By Stephen Cunningham