In a release sent to Rigzone by the Enverus team recently, the company’s subsidiary, Enverus Intelligence Research (EIR), revealed that 2024 “closed with $105 billion in U.S. upstream deals” adding that this was “the third highest total tracked by Enverus”.
EIR noted in the release that last year “trailed only behind a record-setting $192 billion in 2023 and just under the $108 billion booked in 2014”. It added, however, that “activity tumbled in the back half of the year with $9.6 billion of upstream M&A recorded in 4Q24, the fourth consecutive decline in quarterly value”.
“Deal value and volume continued to drop in the final quarter of 2024 from its peak at the end of 2023 as buyers grappled with fewer M&A targets to pursue,” Andrew Dittmar, principal analyst at EIR, said in the release.
“There are also quite a few larger E&Ps working to integrate their previous deals before returning to market to acquire more,” he added.
“Increased volatility in oil prices may have also deterred some buyers, while there is rising enthusiasm for gas and gas-weighted assets to feed burgeoning demand from LNG and data centers,” Dittmar continued.
In the release, EIR stated that the value of gas-focused M&A increased four times in 2024 compared to 2023, “rising above $20 billion for the first time since 2016”. The company noted that the Haynesville is a key area of interest for buyers but added that companies also added assets in other areas like Appalachia.
EIR also said in the release that international buyers “are coming back to U.S. shale assets after being discouraged by poor returns a decade ago” and stated that majors might now turn their attention to gas deals. EIR highlighted in the release that the latter “have been more recently focused on adding oil inventory”.
Looking at oil deals during the fourth quarter of last year in the release, EIR said buyers returned to a familiar playbook of acquiring private companies as corporate M&A waned.
“The largest deal of the fourth quarter was Coterra’s purchase of Avant Natural Resources and Franklin Mountain Energy in the Delaware Basin for a combined $3.95 billion,” EIR noted in the release.
“That pair of deals drove the Permian Basin to account for more than 40 percent of total quarterly deal value, returning the prolific region to its central position in M&A markets,” it added.
In the release, Dittmar said, “the Permian remains at the top of the list for where buyers would prefer to add assets, but it’s also the most challenging market to buy into from the perspective of available targets and sellers’ expectations on pricing”.
“For buyers considering acquiring one of the remaining Permian targets, the question will be if the quality and resource expansion upside is worth the price of admission,” he added.
“For many companies, particularly smaller sized E&Ps that have modest valuations on their own stock, the decision is likely to be to look elsewhere,” Dittmar continued.
EIR stated in the release that buyers looking beyond the Permian are likely to consider a wide range of options, including more mature, established areas like the Williston Basin and Eagle Ford and emerging opportunities like the liquids window of the Utica.
“The set of remaining acquisition opportunities is largely smaller, higher up the cost curve, or both,” Dittmar said in the release.
“However, the need for scale and replacing drilled inventory means smaller E&Ps can’t simply sit out of the market. They will need to acquire these assets and have a credible plan for investors to generate returns that allow them to continue to fund dividend and buyback programs,” he added.
A lack of opportunities to grow may eventually push smaller sized E&Ps to sell and further consolidate the industry, EIR said in the release, noting that there were 11 mergers between public companies that exceeded $1 billion in 2023 and 2024 combined. It highlighted in that this was “more than double the count of the previous two years”.
“Public company M&A can provide compelling valuations for a buyer compared to private assets given the valuation on smaller sized E&Ps,” Dittmar said in the release.
“However, finding a good strategic fit between assets and getting management team alignment has gotten more challenging. The industry will continue to consolidate, but likely not at the same breakneck pace seen during the last two years,” he added.
Private equity firms are also likely to accelerate buying activity to reload portfolios after multiple successful exits to public companies, EIR said in the release.
“A track record of successful recent exits plus an administration that is favorable toward domestic oil and gas production may boost investment interest from private capital,” Dittmar said.
“Private firms may also be more willing to invest in growing volumes compared to public counterparts,” he added in the release .
In a summary of U.S. third quarter 2024 upstream merger and acquisition activity, which was sent to Rigzone back in October, EIR said upstream M&A “descend[ed]… to $12 billion in 3Q24”.
“Following 12 months of heightened consolidation in oil and gas, the pace of deals significantly slowed in the third quarter of 2024 with $12 billion in announced deals, the lowest quarterly total since 1Q23,” EIR noted in that release.
In a release sent to Rigzone back in January last year, EIR said the fourth quarter of 2023 “recorded a massive $144 billion in upstream M&A, the largest quarter EIR has tracked”.
“That pushed full-year 2023 value to more than $190 billion, also setting a record,” it added in that release.
“Driving the surge in value were two historic deals: ExxonMobil’s $65 billion acquisition of Pioneer Natural Resources in the third-largest upstream deal ever by enterprise value and Chevron purchasing Hess for $60 billion in the fourth largest ever,” EIR went on to state in that release.
Enverus describes itself as “the most trusted, energy-dedicated SaaS company, with a platform built to create value from generative AI, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 95 percent of U.S. energy producers, and more than 40,000 suppliers”.
EIR publishes energy-sector research focused on the oil, natural gas, power and renewable industries, the company’s latest release highlighted.
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