In the first quarter of 2023, the United States observed a historic surge in oil and gas deals, reaching a staggering $51 billion. The majority of this activity was concentrated in the renowned Permian Basin spanning West Texas and New Mexico. Energy companies are increasingly drawn to the Permian’s exceptional drilling prospects and relatively modest break-even costs, which average around $64 per barrel. Andrew Dittmar, a principal analyst at Enverus Intelligence Research, emphasizes the Permian Basin’s crucial role, noting that the majority of the country’s top-quality drilling prospects are concentrated in this prolific region. This surge in deal-making is evident in significant transactions, including Diamondback Energy’s $26 billion acquisition of Endeavor Energy Partners and Apache Corp’s $4.5 billion purchase of Permian oil rival Callon Petroleum. While the present pace of M&A activity may not be sustainable, Dittmar highlights the positive impact of strong oil prices, which enable companies to retain non-core drilling assets. This reflects a shift in focus among exploration and production companies, moving from inventory scarcity to strategic asset retention. The year 2023 also witnessed a remarkable level of mergers and acquisitions in the oil and gas sector. Exxon’s $60 billion acquisition of Pioneer and Chevron’s announcement of its $53 billion deal to acquire Hess are notable examples. However, Chevron’s deal has encountered headwinds, as Exxon has asserted right-of-first-refusal challenges over the transaction that would grant Chevron a substantial stake in Guyana’s oil assets. Despite regulatory hurdles, particularly antitrust reviews that have delayed some significant deals, the number of transactions increased to 27 in Q1, representing a 35% jump compared to the same period in the previous year. Sixty percent of the transactions by value occurred in the Permian. This surge in M&A activity underscores the industry’s optimism and the ongoing importance of consolidation in the oil and gas sector.
US Oil and Gas Deals Surge to Record $51 Billion in Q1
