Forbes Piece: Oil And Gas Merger Action Surges After A Dormant First Quarter

[Note: This story is also published at Forbes.com]

Mergers and acquisitions (M&A) activity in the U.S. upstream oil and gas industry roared back in the 2^nd quarter following a moribund first quarter, per a new report from Enverus Intelligence Research (EIR), a subsidiary of Enverus. After totaling just $8 billion in Q1 2023, M&A transactions cited by EIR during Q2 came to triple that number, accompanied by a revived focus on the acquisition of drilling positions in the prolific Permian Basin of west Texas and southeast New Mexico.

“The second quarter saw a thunderous return to Permian M&A after a relatively quiet start to the year,” said Andrew Dittmar, director at Enverus. “The need for public buyers to secure quality drilling inventory has been brewing, and the pressure to make a deal has been mounting as the remaining opportunities are narrowed with each successive transaction. That in turn is driving higher valuations on the remaining assets.”

In an interview this week, Dittmar told me that, while what he called “interesting opportunities” for future deals in other shale basins remain, the superior quality and quantity of rock and the lower breakeven prices that sets up were the main reasons why focus returned to the Permian following a first quarter that saw multiple deals in the Eagle Ford shale in South Texas. “We classify prospects that break even at less than $50 WTI as being tier one,” Dittmar says. “So, if you want to have that quality of inventory, there's really just not a lot of places you can buy it outside the Permian.”