Mergers and acquisitions in the U.S. upstream oil and gas sector fell for the third consecutive quarter, ending massive acquisitions seen in recent years amid persistently low energy prices. According to Enverus Intelligence Research, $9.7 billion worth of deals were closed in the third quarter, a 28% drop from the second quarter and placing the current year well below the record $192 billion recorded in 2023. US crude oil futures averaged ~$65 per barrel during the third quarter, around the level that most American oil producers need to break even, but $10 a barrel below oil prices a year ago.
“Oil prices around $60 or less have made things difficult for sellers, especially private equity firms with oil-weighted assets,” said Andrew Dittmar, principal analyst at Enverus. “Most of the remaining shale M&A opportunities need higher prices to justify public companies paying for undeveloped locations,” he added.
The slowdown in deals in the United States has also been attributed to a lack of opportunities in the Permian Basin, the main focus of North American mergers and acquisitions. Exploration and production companies have increasingly turned elsewhere as asset values ​​soar and the Permian cools.
Earlier this year, EOG Resources (NYSE:EOG) acquired Encino Energy for $5.6 billion, a company that specializes in the Utica Shale; Diversified Energy (NYSE:DEC) bought Anadarko Basin giant Maverick Natural Resources for nearly $1.3 billion, while Citadel paid $1.2 billion for Paloma Natural Gas. Paloma Natural Gas operates primarily in the Haynesville Shale region, which straddles the Louisiana and Texas border, with its assets concentrated on the Louisiana side. The company manages a significant number of mineral acres in this area and focuses on the development and production of natural gas there.
In contrast, Canada’s hot M&A streak has continued into the current year, with the value of upstream M&A deals totaling nearly $12 billion in the first half of the current year, nearly equal to the full-year average over the past five years. Major acquisitions included Whitecap Resources’ (OTCPK:WCPRF) $15 billion acquisition of Veren; Strathcona Resources (OTCPK:STHRF) sold its Montney assets, while CNRL bought Shell Plc’s (NYSE:SHEL) stake in the Athabasca Oil Sands project. However, Strathcona recently rescinded its takeover bid for MEG after Cenovus Energy (NYSE:CVE) made a revised, higher offer for MEG. Canada’s tar sands have a significantly lower breakeven point and can still turn a profit at oil prices that would put most US Shale Patch companies in the red.