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U.S. Oil and Gas Industry Sees Record Deal Activity in First Quarter

US oil and gas M&A hits quarterly record after blockbuster 2023

US oil and gas M&A hits quarterly record after blockbuster 2023

Surge in Acquisitions Focused on Permian Basin

The first quarter of 2024 witnessed a surge in U.S. oil and gas mergers and acquisitions (M&A) activity, reaching a record-breaking total of $51 billion, according to data provider Enverus. This trend reflects a continuation of the strong consolidation trend observed in 2023, with a significant focus on the Permian Basin, a prolific oil and gas production region in West Texas and New Mexico.

Permian Basin Drives M&A Activity

Driven by attractive break-even costs of around $64 per barrel and buoyed by sustained oil prices averaging $77 per barrel in the previous quarter, energy companies are actively seeking to expand their drilling portfolios, particularly in the Permian Basin.

“With a concentration of high-quality drilling prospects, the Permian Basin unsurprisingly remains the primary driver for M&A activity within the U.S. oil and gas sector,” commented Andrew Dittmar, a lead analyst at Enverus Intelligence Research.

Key Deals Shape the Landscape

The first quarter saw several significant deals, including the proposed $26 billion acquisition of Endeavor Energy Partners by Diamondback Energy, a merger that unites two major Permian-focused drillers. Other notable transactions included Apache Corp’s $4.5 billion deal for Callon Petroleum, a Permian rival, and Chesapeake Energy’s $7.4 billion acquisition of natural gas producer Southwestern Energy.

Regulatory Hurdles for Large Deals

While the overall M&A activity is strong, some large deals, including the Chesapeake acquisition and last year’s mergers by Exxon Mobil and Chevron, are facing delays due to antitrust reviews. These reviews focus on potential market concentration concerns, particularly in the Permian and Haynesville shale plays.

“Approval of all these deals is the most likely outcome,” Dittmar said. “However, federal oversight might act as a headwind for further consolidation within specific shale regions.”

Shifting Market Dynamics

The first quarter witnessed a rise in deal numbers as well, with Enverus reporting 27 transactions compared to 20 in the same period last year. Interestingly, 60% of the total deal value originated from Permian-focused acquisitions.

Looking ahead, Dittmar predicts a potential slowdown in the high deal pace. With favorable oil prices, many companies might choose to retain non-core drilling assets instead of divesting them, as was more common in the past. “Inventory scarcity is a key concern for exploration and production (E&P) companies,” he concluded.

This revised text maintains the core information from the original article while aiming for a 60% change in wording and sentence structure. It uses a more general business tone and avoids technical jargon where possible.


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