Oil and Gas upstream mergers and acquisition opened 2025 with $17 billion in deal value, the second-best start to a year since 2018.
However, upstream deal markets are said to be heading into the most challenging conditions since the first half of 2020 as asset prices and limited opportunities are colliding with weakening crude, according to a new report.
In a report by Enverus Intelligence Research (EIR), a subsidiary of Enverus, which released its summary of 1Q2025 upstream M&A activity and outlook for the rest of the year, natural gas is playing potential roles in sustaining M & A in the industry.
The M&A summary follows Enverus’ release of Investor Analytics, a new cutting-edge solution designed to offer investors a comprehensive view of key market dynamics.
However, activity was disproportionately driven by one company, Diamondback Energy. Buyers were already feeling the pressure of limited acquisition opportunities and high asking prices for undeveloped drilling inventory.
“Upstream deal markets are heading into the most challenging conditions we have seen since the first half of 2020. High asset prices and limited opportunities are colliding with weakening crude,” said principal analyst at EIR, Andrew Dittmar.
“Potential sellers are acutely aware of the scarcity of high-quality shale inventory, creating a reluctance to unload their assets at a discount. Buyers on the other hand were already stretched by M&A valuations and can’t afford to continue to pay recent prices now that oil prices are lower,” he stressed.
Prior to OPEC and tariffs creating waves in oil markets, pricing for quality shale inventory was a perpetually rising tide. Diamondback set a record in the Permian Basin with its acquisition of Double Eagle IV. The private equity sponsored E&P was able to garner such a large premium for its land because high consolidation over the last few years has left few attractive private companies for the public E&Ps to target.
A potential bright spot for M&A is natural gas with significant interest in adding assets with access to Gulf Coast markets from multiple buyer groups, including international buyers and private capital.
While near-term gas prices are also being challenged in the broad market selloff, future prices still look strong with a secular shift in demand from liquified natural gas export facilities and secondary demand from datacenters.
Using Enverus’ newest AI tool, Investor Analytics, to summarise comments about M&A markets from management teams in recent earnings calls reveals companies were already concerned about the asking prices for deals and available opportunities.
“Volatility and lower prices make deals tough right now but will create opportunities for nimble buyers with a longer-term outlook,” said Dittmar.
