U.S. oil and gas dealmaking fell to a two-year low of $8.58 billion last quarter, as combinations of natural gas companies dried up and oil buyers focused on mature plays, energy analytics firm Enverus said on Tuesday.
The results fly in the face of expectations for a tsunami of mergers and acquisitions given the giant profits made by U.S. shale oil firms in the last two years. But rather than more and bigger dollar deals, their number and average price tumbled.
"The collapse in deal counts is really remarkable," said Andrew Dittmar, a director at Enverus. He said the low number of deals "is likely the new normal in shale M&A," and attributed part of the slowdown to natural gas prices at multi-year lows.
There were 16 M&A deals in the first quarter of 2023 compared to 45 in the same period last year with most in the Eagle Ford shale of South Texas, where assets can be purchased for the value of existing production alone, he said.
While the average deal size in the first quarter was $500 million, there were several combinations notable for their larger value.
Eagle Ford operator Ranger Oil was acquired by Canada's Baytex Energy for $2.5 billion and Chesapeake Energy struck a $1.42 billion asset sale to WildFire Energy and a separate $1.4 billion sales agreement with Britain's INEOS, the latter two also in South Texas.
"We are seeing far fewer opportunities for deals in the current market that is much more consolidated and has much less undeveloped resources," said Dittmar. While opportunities still exist, shale M&A "may be in its latter innings," he said.
The total value of future deals could rise again with activity in the Permian Basin, the top U.S. shale field, he said. Top-tier locations there have sold for $2 million and up to $3 million in some cases, he said. That has left only companies with deep pockets able to buy into the basin.
