If words spoken during second-quarter 2021 earnings calls so far give any indication of what could lie ahead, the U.S. shale sector could see some more deal action—in various sizes—amid a continued efficiency and discipline drive.

But only time will tell which companies are up for large-scale acquisitions.

The topic surfaced recently on numerous earnings calls with analysts as the wave of consolidation continues to sweep across U.S. shale plays. Leaders discussed strategies without tipping their hands but shedding some light on their focus as the number of players shrink, possibly making the sector attractive to potential investors.

“We’re constantly screening opportunities to both buy and sell assets, and we’re constantly trying to high-grade the portfolio,” ConocoPhillips CEO Ryan Lance said. The company acquired Permian Basin producer Concho Resources Inc. earlier this year in a deal valued at $9.7 billion, expanding its Permian to about 700,000 net acres.

Though it seems as if there are more assets coming to the market, Lance doesn’t necessarily see a buyer’s or seller’s market today. What matters is maintaining rigor and discipline around cost of supply, finding value and being patient, he said. “I think the market may require that even now more than ever.”

His words come as an oil price rebound, courtesy of an economic recovery fueled in part by massive vaccine rollouts, leads to higher profits and more cash flow for shale operators.

Many are sticking to capital discipline promises, opting to pay down debt and return money to shareholders. Some are scaling up through acquisitions, paving paths toward synergies that include lower costs, efficiency and growing premium drilling locations.

Chesapeake Energy Corp. was among the latest, announcing Aug. 11 its plans to buy fellow Haynesville Shale player Vine Energy Inc. in a deal valued at $2.2 billion.

Upstream M&A deal value reached $33 billion, stemming from more than 40 deals announced in the second quarter, according to Enverus. The energy data analytics firm said the total included seven deals worth more than $1 billion each.

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EOG Resources Inc. is focused on bolt-on opportunities, potentially adding to its 11,500 premium locations and 5,700 or so double-premium wells capable of earning a minimum 60% direct after-tax return at $40/bbl oil and $2.50/MMBtu natural gas.

“In the past 12 months through eight deals, we have added over 25,000 acres in the Delaware Basin through opportunistic bolt-on acquisitions at an approximate cost of $2,500 per acre,” said EOG President Ezra Yacob, who will become CEO on Oct. 1 when Bill Thomas retires. “These are low-cost opportunities within our core asset positions, which in some cases receive immediate benefit from our existing infrastructure. Premium and now double-premium established a new higher threshold for adding inventory. Exploration and bolt-on acquisitions are focused on improving the quality of the inventory by targeting returns in excess of the 60% after-tax rate of return hurdle.”

He pointed to the company’s ability to add low-cost, high-quality inventory—mainly through organic exploration—as a reason why EOG does not need to chase pricy large M&A deals.

“We’re focused on these small, high-return bolt-on acquisitions,” Yacob said. The high acreage and PDP costs for large acquisition packages may struggle to compete with EOG’s existing return profile. “It might be additive to the quantity of our inventory, but not additive to the quality. … We’re always working to improve the quality of our assets. We’re having a great success with these small bolt-on acquisitions.”

Permian Basin pure-play Pioneer Natural Resources appears unlikely to be active in the Midland Basin M&A space anytime soon, having completed its acquisitions of DoublePoint Energy LLC and Parsley Energy Inc. in January.

Pioneer CEO Scott Sheffield said those two companies were the best opportunities with “great” Tier 1 inventory. “I don’t anticipate anything becoming available,” Sheffield told analysts. “So, there’s no need for us to look at further opportunities at this point in time.”

The two acquisitions pushed Pioneer’s contiguous net acre position in the Midland Basin to about 920,000 and to about 100,000 in the Delaware Basin. The $250 million worth of operational synergies include extended lateral lengths of up to about 15,000 ft, drilling and completion efficiency gains including through simul-frac and increased use of reclaimed and reuse water via connected water infrastructure—to name a few.

Pioneer’s the largest producer in the Permian with the largest inventory of Tier 1 locations—over 15,000—and the lowest breakeven price in the Lower 48,” added Sheffield. “Both recent acquisitions were highly accretive and added significant Tier 1 inventory. We were not looking at any more Midland Basin large acquisitions. We bought the best two available.”

However, trades and smaller deals are not off the table as it looks to grow returns at today’s higher prices in both the Delaware and Midland basins.

“We are continuing to do trades. … We’ll continue to look at small divestitures,” he said. “So, there could be some small opportunities on the small side, but it’s insignificant and doesn’t affect free cash flow.”

For Diamondback Energy, attention is on selling non-core assets, following the March close of its $2.2 billion acquisition of Denver-based QEP Resources and February close of Blackstone Energy Partners-backed Guidon Operating LLC for $375 million.

In May, the company announced the sale of Bakken assets acquired during its QEP acquisition to Oasis Petroleum Inc., marking its exit from the Williston Basin. The company also said at the time it had agreed to divest noncore acreage in the Permian Basin.

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“It feels like a seller’s market out there,” said Diamondback CEO Travis Stice. “Our M&A focus is really intense around selling non-core assets. One of the most important jobs that we have as management is allocating capital.”

Looking at mid-cycle prices of $50/bbl for oil, $15/bbl for NGLs and $2/MMBtu for natural gas, the NAV of Diamondback’s stock are higher than where the company is today, he said.

“If that backdrop persists, the best use of our capital is not in the M&A market, it’s rather in the buyback of own stock,” Stice said, adding acquisitions don’t feel like the right thing to do now. “Our focus is simply around monetizing noncore assets and really looking hard at our business. I really like the way our forward plan looks with our existing inventory.”

For Devon Energy, moves—either on the buying or selling side—must be immediately accretive with compelling industrial logic and must strengthen the business, CEO Rick Muncrief said.

“If we just keep volumes flat, we’re going to add an additional $1 billion of cash flow next year,” he said. That equates to 20% year-over-year growth on a cash flow per share base.

“We continue to have a very high bar,” Muncrief added, “and we’re going to be very, very disciplined in anything we do.”