US oil, gas transactions surge to $51b in Q1

US oil and gas transactions in the first quarter (Q1) surged to a record-breaking $51 billion, building upon the intense merger activity seen last year, particularly in the primary US shale region, according to Reuters citing data from Enverus released on Tuesday.

Energy firms raced to bolster their portfolios for oil and gas drilling, with a keen focus on the Permian Basin in West Texas and New Mexico. 

This region boasts break-even costs of around $64 per barrel, while oil prices averaged approximately $77 per barrel last quarter and hovered around $83 per barrel this week.

Andrew Dittmar, principal analyst at Enverus Intelligence Research, noted, “Most of the prime drilling opportunities in the US are situated in the Permian, so it’s no surprise that this prolific basin once again drove mergers and acquisitions (M&A) activity within the oil and gas sector.”

The largest proposed acquisition in the last quarter was Diamondback Energy’s $26 billion offer for privately held Endeavor Energy Partners, uniting two Permian-focused drillers.

Other significant transactions included Apache Corp parent APA’s $4.5 billion agreement to acquire Permian oil competitor Callon Petroleum, and Chesapeake Energy’s $7.4 billion deal in April for Southwestern Energy, a natural gas producer.

However, Dittmar highlighted that the Chesapeake acquisition and major deals from the previous year involving Exxon Mobil and Chevron are facing delays due to antitrust reviews, partly due to their consolidation of assets in the Permian or Haynesville shale regions.

While Dittmar anticipates eventual approval for these deals, he cautioned that federal regulatory scrutiny might hinder further consolidation within specific plays.

The first quarter witnessed an increase in the number of transactions to 27, up from 20 in the same period last year, with Enverus estimating that 60 per cent of the total transaction value was concentrated in the Permian Basin.