Permian Basin Dominates US Energy M&A Activity in Q1

Houston-based data provider Enverus reported that the United States saw a record-breaking $51 billion worth of oil and gas deals in the first quarter of the year, with much of the activity centered around the Permian Basin in West Texas and New Mexico.

As energy companies seek to expand their drilling inventories, the Permian's reputation for high-quality drilling prospects and relatively low break-even costs of around $64 per barrel continues to attract significant investment. Andrew Dittmar, Enverus Intelligence Research's principal analyst, highlighted the Permian Basin's pivotal role, noting that most of the top-notch drilling opportunities in the US are concentrated in this prolific region. Notable transactions in the first quarter included Diamondback Energy's $26 billion bid for Endeavor Energy Partners and Apache Corp parent APA's $4.5 billion deal for Permian oil rival Callon Petroleum.

Regulatory hurdles, however—particularly antitrust reviews—have stalled some major deals, including Chesapeake Energy's $7.4 billion acquisition of Southwestern Energy, as they consolidate holdings in key shale fields.

Despite the regulatory challenges, the number of deals increased to 27 in the first quarter, compared to 20 in the same period last year, with 60% of the transactions by value occurring in the Permian. While the current pace of M&A activity may not be sustainable, Dittmar noted that strong oil prices are enabling companies to retain non-core drilling assets, reflecting a shift in focus from inventory scarcity to strategic asset retention among exploration and production companies.

2023 was also a banner year for mergers and acquisitions in the oil and gas space, with Exxon's $60 billion purchase of Pioneer and Chevron's announcement of its $53 billion deal to snap up Hess, which has encountered headwinds with Exxon mounting right-of-first-refusal challenges over the deal that would hand Chevron a significant stake in Guyana's oil assets.

By Julianne Geiger for Oilprice.com

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