U.S. oil and gas deals surged to a record $51 billion in the first quarter of 2023, as energy companies continued their aggressive pursuit of mergers and acquisitions to expand their drilling inventories. The surge in deals was largely driven by the Permian Basin of West Texas and New Mexico, where producer break-even costs are about $64 a barrel. Oil prices averaged about $77 a barrel last quarter and have recently traded near $83 per barrel. Most of the high-quality U.S. drilling prospects are in the Permian, making it unsurprising that the prolific basin was yet again the primary driver for M&A within oil and gas, said Andrew Dittmar, principal analyst at Enverus Intelligence Research. The biggest proposed acquisition last quarter was Diamondback Energy’s $26 billion bid for closely held Endeavor Energy Partners, a merger that brings together two Permian-centric drillers. Apache Corp’s $4.5 billion deal for Permian oil rival Callon Petroleum, and natural gas Chesapeake Energy’s April $7.4 billion deal for Southwestern Energy rounded out the period’s most valuable deals. However, the Chesapeake acquisition and last year’s blockbuster deals by Exxon Mobil and Chevron remain stalled by antitrust reviews in part because they concentrate holdings in the Permian or Haynesville shale fields, said Dittmar. The number of deals rose to 27 last quarter, compared with 20 in the same period a year ago, and 60% of first quarter transactions by value were in the Permian, Enversus calculates. That high pace is unlikely to persist, Dittmar said, with strong oil prices allowing more companies to justify holding onto non-core drilling assets rather than discard them as they once did.
U.S. Oil and Gas Deals Hit Record $51 Billion in First Quarter
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