If the US shale patch is going to see an uptick in dealmaking, it might have to find more buyers from outside its borders.
This is one takeaway from the latest update from the research arm of Enverus, which tracked $13.5 billion in shale mergers and acquisitions during the second quarter, a 21% drop from the previous period.
The bulk of the transaction total came from just two deals.
In June, EOG Resources announced takeover plans of Utica Shale operator Encino Acquisition Partners for $5.6 billion. That same month, Diamondback Energy’s mineral investment subsidiary moved to buy Sitio Royalties Corp. for $4.1 billion.
Only eight deals exceeding $100 million were recorded during the quarter. Enverus said that ties the lowest deal count in US shale since early 2020, at the onset of the COVID-19 pandemic.
Andrew Dittmar, principal analyst for Enverus Intelligence Research, said recent market volatility has been a “yellow flag” for oil and gas producers that are running out of buying options, even in the vast Permian Basin.
“The engine of [mergers and acquisitions] over the last few years has sputtered and stalled, given there are just a few remaining targets, and, outside the rare opportunity like APA’s deal with Permian Resources, it is not a region public companies are likely to pick for noncore asset sales,” Dittmar said of the situation in the Permian.
The APA deal to sell assets in the Permian’s Delaware Basin was valued at more than $600 million and included 13,300 net acres.
With the Permian slowing, attention is shifting to secondary plays such as the Utica and the Uinta Basin. But Enverus notes these regions lack the scale that large operators typically seek.
“While companies have so far been reluctant to look outside the US, eventually that will likely need to include assets in Canada or other international areas like Argentina’s Vaca Muerta,” Dittmar said.
The report also pointed out that, outside of the Diamondback deal, none of the others involved publicly traded companies.
This may be a sign that public-to-public consolidation may be taking a pause. However, Dittmar said that could change based on the current market conditions.
“These types of deals should be easier to negotiate in a volatile environment given they are generally stock-for-stock swaps that limit commodity price risk and the valuations on some public names are compelling for a buyer. The most obvious and willing sellers just got taken out earlier in the consolidation cycle, and it’s going to take some time for more companies to come to the table.”
The bright spot on the dealmaking front is coming from private equity groups that are looking to rebuild their portfolios with smaller assets that may include more deals in the Permian.
Enverus also considers Oklahoma’s SCOOP/STACK play to be prime for a wave of exits by publicly traded operators, including ConocoPhillips, which took on a noncore position in the play through its acquisition of Marathon Oil in 2024.
The big challenge facing many properties on the block, however, is simply that there are too many producing wells and not enough untapped locations. “That changes the acquisition strategies and expected returns on deals,” Ditmar said.
One thing to watch for will be the amount of foreign investment that is interested in US shale’s maturing assets, many of which are gas heavy or getting there. Enverus said Asian companies with liquified natural gas contracts are the newest candidates for buoying the buying market and may find existing production is more attractive than undeveloped assets that carry a bigger upfront risk.
Another needle mover might be artificial intelligence (AI). Enverus highlighted EQT Resources recent $1.8 billion-purchase of gas producer Olympus Energy as a move aimed at supporting energy-intensive AI data centers that are planned to be built around Pittsburgh.
