After $300bn of consolidation in the US oil and gas industry over the past two years, deal making is set to fall in 2025 while breakeven prices for acquired inventory will likely rise, according to consultancy Enverus.
The rapid pace of mergers and acquisitions targeting shale-based assets has led to many of the best targets having been snapped up. As a result, the quality of newly acquired inventory is declining, averaging a $50/bl breakeven price in 2024, up from $45/bl in 2022-23, Enverus calculates.
"The pool of available remaining private equity assets is largely smaller, higher on the cost curve or both," Enverus said in its annual outlook.
Yet a pressing need for scale and future of location inventory will encourage smaller producers to embark upon more deals. And improved efficiencies — such as drilling longer lateral wells — will be key in boosting economics on more marginal acreage.
Mergers involving public companies will ease up in 2025 from a recent average of five a year, according to Enverus. While deals involving smaller producers may offer suppressed valuations relative to private opportunities, a potential lack of a strategic fit and agreement on future management teams may pose obstacles.
