After a massive surge in consolidation over the past two years, the U.S. oil M&A market is hitting the brakes amid mounting price swings and geopolitical uncertainty.
M&A experts say those factors are undermining deal flow, particularly among oil-weighted deals. WTI oil prices have whipsawed between around $55/bbl and $75/bbl since the Trump administration’s April 2 Liberation Day, fueling uncertainty across energy markets. A short-lived price rally into the $70s—triggered by Middle East tensions between Israel and Iran—quickly reversed as market fundamentals reasserted themselves.
Uncertainty is translating into paralysis across the upstream M&A space. Even when buyers are active, sellers hesitate, fearing they’re selling too low—leading to a widening bid-ask spread.
“It just makes it really hard for buyers and sellers to come together on any kind of fair pricing,” said Andrew Dittmar, principal M&A analyst for Enverus Intelligence Research.
“I think you can transact deals at lower crude prices and higher crude prices, but you can’t transact deals when you don’t know where crude is going to be.”
Sellers remain bullish, often anchoring to higher long-term oil price assumptions. Buyers are more cautious, pricing deals closer to the $60/bbl to $62/bbl long-term strip, according to Dan Pickering, chief investment officer for Pickering Energy Partners (PEP).
The result is a valuation gap too wide to easily bridge, especially in oil-weighted deals.
“It’s hard to get deals done because I’ll pay $62 long-term and the seller wants $70 long term—that’s a pretty big gap,” Pickering said.
Oil digests
Experts say natural gas-focused deals are easier to price with greater stability in forward strip curves. Gas sellers are more willing to accept the strip, unlike oil sellers.
Long-term U.S. gas demand is being bolstered by anticipated growth in LNG exports and rising demand from data centers.
But oily M&A is grappling with a range of challenges, from falling prices to a dwindling supply of attractive assets.
Most of the “easy,” strategic, common-sense M&A deals were completed in the past 24 months, particularly in the Permian Basin.
Large-cap E&Ps are still digesting those prior transactions, integrating assets and streamlining operations before diving back into new M&A.
Many private equity-backed firms and smaller publics that were receptive to exits have already sold, Dittmar said.
Those deals “got done earlier in this consolidation wave, so we were headed for a bit of a slowdown anyway,” he said.
Despite M&A slowing down, A&D hasn’t rolled up yet. Portfolio rationalization and debt reduction are prompting some companies to divest non-core assets.
“A seller must have a specific need or motivation to enter the market right now,” said Cristina Stellar, senior vice president and managing director of energy investment banking at BOK Financial.
After completing a $17.1 billion acquisition of Marathon Oil, ConocoPhillips continues to market Marathon’s legacy Midcontinent assets in the Anadarko Basin. Marathon’s Oklahoma assets are expected to fetch around $1 billion in a potential sale.
Occidental has made a handful of non-core sales after completing a $12 billion acquisition of CrownRock in the Permian.
Exxon Mobil has also cleaned up its portfolio after completing a $60 billion acquisition of Pioneer Natural Resources. Exxon is reportedly seeking a buyer for some of its Bakken oil assets.
“I think deals are still moving forward. We’ve got several of them in the market now,” said Stephen Trauber, managing director, chairman and global head of energy and clean technology at Moelis.
But Trauber acknowledged that valuation gaps between buyers and sellers remain a challenge, particularly in oil-leveraged deals.
And gaps like these typically don’t close quickly. Pickering said it could take six to 12 months before M&A markets begin flowing steadily again.
Trauber said up to 18 months could pass before “sizable” oil transactions start to regain momentum.
Well balanced
Unlike in previous downturns, E&P balance sheets are healthy across the industry, enabling companies to wait out volatility.
A few companies are making non-core sales to reduce leverage, but most firms aren’t facing fire-sale pressures thanks to years of fiscal discipline.
“The interesting thing about now versus the shale bust is that everybody’s balance sheet is in great shape,” Pickering said. “They’re trying to decide what’s the best way to move through this soft patch.”
Companies with exceptionally strong financials, such as EOG Resources, are leaning into counter-cyclical M&A opportunities.
EOG announced a $5.6 billion acquisition of Ohio Utica E&P Encino Acquisition Partners on May 30. The deal, with sellers Canada Pension Plan Investment Board and Encino Energy, includes $2.1 billion in cash and the assumption of $3.5 billion in debt.
“My read on it is EOG had the best balance sheet in the business,” Pickering said. “They had net cash and could take advantage of a seller that wanted cash.”
And in South Texas, EOG acquired 30,000 acres in Atascosa County, Texas, from Arrow S Energy Operating for $275 million, describing it as the largest remaining undeveloped acreage in the core of the Eagle Ford Shale.
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