The Surging Appetite of U.S. Oil and Gas Producers for Dealmaking: A Record-Breaking Year Ahead
By Shariq Khan
In a recent analysis by consultancy firm Rystad, it has been revealed that U.S. oil and gas producers are on track to surpass last year's record for dealmaking. The interest in smaller oilfields is rising, offsetting slower activity in the Permian basin, the top oil-producing region.
According to Rystad's analysis, U.S. producers have already spent nearly $100 billion on mergers and acquisitions (M&A) this year, with another $46 billion worth of assets currently up for sale. In 2023, a record $155 billion worth of production and exploration-focused deals were signed, highlighting the industry's momentum.
Last year saw a flurry of mega-deals as top oil producers sought to boost their output and expand their drilling locations. This consolidation trend has provided private owners with a lucrative opportunity to exit their investments profitably.
Raina, an analyst at Rystad, predicts that private equity-backed oil producers will continue to sell off assets to capitalize on public companies' demand for inventory and secure premium valuations amidst increasing competition among buyers.
While the Permian basin dominated dealmaking last year, intense competition has driven opportunistic buyers to explore other regions. SM Energy, for example, has expanded its footprint in the Uinta basin in Utah by acquiring XCL Resources for $2 billion, citing the challenges of finding good deals in the Permian.
According to Rystad's analysis, deals focused on the Permian accounted for only 46% of the total in the first half of this year, compared to 92% in the second half of last year. The Bakken basin in North Dakota saw a growth in deals to 12% in the first half of this year, while the Marcellus basin in Pennsylvania and the Eagle Ford basin in Southeast Texas represented 14% and 13% of the deals, respectively.
Overall, the trend of increasing dealmaking activity in the oil and gas industry presents both challenges and opportunities for investors and stakeholders. Understanding the shifting landscape of the market and the emerging regions of interest can help individuals make informed decisions about their investments and financial strategies.