The US shale sector’s steady drumbeat of transactions may be a clear signal that industry players are bracing for a future in which there are fewer options for growth.
This is one takeaway from a new report released today by Enverus Intelligence Research which said the US tight oil business marked its third consecutive quarter of seeing deals top $30 billion.
Including this month’s announced deals, the year-to-date total recorded by Enverus is nearly $90 billion while the 12-month tally is closing in on $250 billion. Enverus added that quarterly deal value topped $30 billion only three other times since 2017 prior to the recent uptick in dealmaking.
The report also pointed out that the quarterly values have been inflated thanks to a single large transaction amid a handful of smaller ones.
In the first quarter of this year, it was Diamondback Energy announcing its $26-billion purchase of Endeavour Energy. This most recent quarter saw ConocoPhillips move to buy Marathon Oil for $22.5 billion.
Andrew Dittmar, a principal analyst for Enverus Intelligence Research, noted that in the last quarter of dealmaking, previously inactive companies—ConocoPhillips, Devon Energy, and SM Energy—each made significant moves to achieve greater scale.
“In the case of ConocoPhillips and Devon Energy, running out of inventory doesn’t appear to be as high a concern, but there is still a perception that successfully navigating the maturing phase of shale requires building resource base with M&A,” he added.
The findings from the oil and gas market research firm were released on the heels of a trio of shale deal announcements.
Occidental Petroleum (Oxy) announced on 29 July that it sold assets in Texas and New Mexico for nearly $818 million to Permian Resources. The transaction included 29,500 net acres in the Permian Basin's Delaware Basin, where production is approximately 15,000 BOE/D.
Additionally, Oxy made separate deals totaling nearly $152 million for other properties. The sale of the Delaware Basin assets is part of Oxy's previously announced plan to divest up to $6 billion in noncore assets to help finance its $12 billion acquisition of CrownRock, announced in 2023.
On 28 July, Tulsa-based Vital Energy announced a joint purchase agreement to acquire Point Energy Partners for $1.1 billion in cash. Vital will retain 80% of Point Energy, while Northern Oil and Gas will assume the remaining 20% stake. Vital plans to fund its $820- million share of the acquisition using its credit facility, recently increased to $1.5 billion.
The acquisition includes 49 net drilling locations with an average breakeven oil price of $47/bbl. Current production of the asset is around 30,000 BOE/D, resulting from a 15-well program executed in March. However, Vital expects production to stabilize at 15,500 BOE/D (64% oil) by year-end due to natural declines and a moderated drilling program involving one rig and seven new wells.
Separately, Post Oak Minerals said on 29 July that it agreed to buy a large-scale mineral and royalty interest position in the Permian for $475 million. The Houston-based investment group said the sellers included Apache Corp. and the Hunt Oil Company along with family offices and individual owners.
Dittmar suggested that the deals led by Vital and Oxy likely represent the future of the region’s dealmaking, as "large, core acquisition opportunities in the Permian are increasingly rare."
What’s Driving Deals?
Enverus sees the key driver behind recent shale deals as the rising price of untapped drilling locations.
Dittmar noted that premium pricing for high-quality rock has led to "a scramble for middle-tier inventory that provides strong returns even if it isn’t as economic as core Permian assets."
This trend explains the uptick in deals focused on the Eagle Ford Shale and, to a lesser extent, the Bakken Shale in North Dakota.
While both are mature plays, they remain attractive due to the recently emerged potential of adding production and reserves through the refracturing of existing, and typically suboptimally, completed wellbores.
Enverus highlighted that refracturing played a significant role in the recent deals made by Devon and ConocoPhillips, which reported their acquisitions included 300and up to 1,000refrac candidates, respectively.
Outside of those considering large refracturing programs, some other US oil companies have shown they still have a taste for more traditional risks by buying into relatively undeveloped regions.
This includes SM Energy’s announced purchase of XCL Resources’ Uinta Basin assetsin Utah. Dittmar explained that while such deals represent a cost-effective strategy for increasing well inventory, they reveal a market shift where operators "are willing to prepay for inventory" before it is fully proven.
Another important theme of the current shale M&A trend is the push by private operators to sell to publicly traded counterparts. More than $100-billion worth of private equity or family-owned oil and gas properties have traded hands with public companies since 2022.
Enverus noted that "there is still room" for more private equity firms to unload their portfolios, especially in the Eagle Ford and Oklahoma’s SCOOP/STACK play, where several viable acquisition targets remain.
