The chaos set off by April 2’s Liberation Day tariff announcements led to losses in the markets, a plunge in oil prices and a swell of anxiety. L-Day did not, however, kill off oil and gas deals; the effect was more akin to an uncertainty-induced coma.

A slumber from which the A&D market is beginning to emerge.

The reaction from sellers ranged from “put your pens down” to “let’s just not jump into the market right now” to “elongating” sales processes, dealmakers and analysts said at Hart Energy’s Energy Capital Conference in Houston.

The deals are still out there, and assets remain up for sale, but the shock of dropping oil prices and recessionary fears put M&A and A&D on pause. Slipping WTI pricing also widened the bid-ask spread between buyers and sellers. Gas deals, panelists said, continue to gain traction.

Public company dealmaking has been hindered by some of those same factors and others, including the cost of capital and tumbling equity values.

Ultimately, industry observers and dealmakers think a lot of the ruckus has been overblown. They’re still more interested in the coming Great Rationalization—the peeling off of non-core assets from roughly $200 billion worth of M&A over the past few years.

The theory is that after companies went full throttle to buy peers, particularly in the Permian Basin, large independents and majors would divest assets that don’t fit their long-term plans. An early example: Occidental Petroleum sold some of its Delaware Basin assets to Permian Resources in September for about $817 million. The divestiture came shortly before Occidental closed its acquisition of CrownRock LP for $12 billion.

Chris Atherton, CEO of Efficient Markets, said the average deal size during the past three or four years “has probably been around $800 million” compared to the previous two-decade average of perhaps $200 million to $250 million.

“I think the consensus viewpoint is that these companies, once they digest and understand what they have as a combined entity or after they've made three or four or five different large-scale acquisitions, there's going to be assets divested that were considered non-core,” he said.

The problem: It hasn't happened as fast as anyone would like.

“I believe that the private equity main group, Pearl, Carnelian, Quantum, EnCap, NGP, Kayne have all raised massive funds and have dry powder ready to be deployed,” Atherton said.

Private equity firm Pearl Energy Investments’ Fund IV raised $999.9 million after closing Jan. 31. Last year, EnCap Investments closed its Fund XII with $5.25 billion. Quantum Capital Group raised $10 billion for its private equity, structured capital and private credit platforms— with $5.25 billion specifically for its Quantum Energy Partners VIII.

“I think they're banking on the Exxons and Chevrons and Oxys and others divesting non-core assets and they're going to be ready there to capitalize on that,” Atherton said. “So I still think it's coming.”

David Deckelbaum, managing director at TD Securities, also noted that two majors — Exxon Mobil and Chevron — are tied up in arbitration over Hess Corp.’s interests offshore Guyana, likely until September.

“Keep in mind you have two majors that are tied up with the Hess negotiations right now,” Deckelbaum said. “There are some potential non-core asset sales that are pent up” until an arbitration decision is made.

“So whatever side prevails, I would anticipate you'd start seeing focus on basins like the Bakken, also, following the Conoco-Marathon transaction, right? There's sort of I think this pent-up wave of assets that are still yet to come to the market. That probably frees up a little bit more activity.”

Deckelbaum added there appears to be more credible interest in non-operated assets than in the past. “I think that's a lot more of a function of the universe of more mineral opportunities being exhausted and seeing the mineral investors kind of gravitating or migrating into the non-op world.”

New game or the same?

However, things have changed for private equity, Atherton said. During the heyday of drill-and-flip asset buying, PE de-risked and quickly sold assets to neighboring E&Ps. When that dried up, private equity sponsors were forced to hold companies for much longer than planned.

“And then the past couple of years you've seen all of them be sold off and then the sponsors have reloaded and are back to work again,” he said. “But I think the game plan right now is different. I mean how much acreage is there? The game is different. I think that they're still trying to figure out exactly what that is. The playbook isn't as tried and true as it maybe once was.”

Deckelbaum added that private equity is “still playing into a captive market right now.”

“By reference, the price per location in the Permian between the Delaware and Midland tripled in the last five years,” he said. “So if you're paying over $3 million per location, that's like a pretty low hurdle for finding something that's going to work. Obviously the areal extent is different. You can't just grip it and flip it anymore.”

However, Deckelbaum said there doesn’t necessarily have to be a holistic pivot in private equity strategy. “You haven't seen, I think, a wave of capital being raised that's significant now versus [what] it was several years ago. I think you're just seeing another round of recycled capital that exited that, undoubtedly, I think is going to test some new areas, but it's probably just going to test more extensional concepts of existing basins.”

Dealmakers restart engines

Fears of a prolonged M&A drought are starting to ebb.

Kim Mai, a partner at Haynes & Boone and member of the firm’s energy practice group, said she’s seen deals coming back “with enthusiasm” after the initial shock of April 2.

“I expect that year-end is going to be fairly busy in the A&D market and also the M&A market,” she said.

So, who has the upper hand: buyers or sellers?

“In terms of the question of whether it's a buyers or seller market, I think it really depends on the commodity. So with oil, if anything, it might slightly be a buyers’ market because there's kind of an acknowledgement that the assets that are on the market are maybe less attractive options,” she said. “And so we see that in negotiations where some of our clients wouldn't have the leverage power necessarily to negotiate some terms and they're able to do so now.”

On the gas side, the market favors sellers, Mai said.

“We are working on a gas deal right now and the offers have been very competitive and there's multiple bidders,” she said.

Further, Jeet Benipal, managing partner at Greenhill, a Mizuho affiliate, said there’s at least five or six different shale gas deals on the market foreign investors are interested in buying.

“If I were to add all of them together, we’re probably looking at $10-plus billion” in deals, he said during the conference.

Likewise, Jack Collins, president of privately held INEOS’ Denver-based, U.S.-focused E&P business unit, said the company is looking for additional assets.

And at the end of May, EOG Resources announced it would buy Utica Shale producer Encino Acquisition Partners from the Canada Pension Plan Investment Board (CPP) and Encino Energy for $5.6 billion.

On June 3, Diamondback Energy subsidiary Viper Energy said it would acquire Sitio Royalties in an all-stock deal valued at $4.1 billion.

Behind the scenes, the smaller dealmaking market has also continued to move. The transactions just aren’t of the megadeal magnitude.

“Within our market … we see there's a huge ecosystem in the minerals and royalty space that deals are always transacting and also deals in the non-operated working interest space, which has become a very much very mature, well sophisticated, well capitalized market,” Atherton said. “So we're still seeing quite a bit of deal flow.”

Atherton also said he expected the back half of 2025 to be “heavily weighted with people trying to put money to work and people trying to divest assets that they intended to.”

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