Commodity price volatility and broader economic concerns have stifled the market for oil and gas deals that saw a hot start to upstream oil and gas M&A in 2023, analysts say.

Despite a significant slump in natural gas prices since late last year and more recent shakiness in crude oil prices, first quarter transactions were approximately $8.7 billion, Andrew Dittmar, research director at Enverus Intelligence, told Hart Energy. That would rank as the sector’s best start to the year since first-quarter 2018, he said.

But those values belie a market that has since reeled from uncertainty.

“We were in that Goldilocks pricing scenario in the high-$70s/bbl, $80/bbl range where sellers were comfortable giving up the assets at that kind of pricing,” Dittmar said. “Buyers, at the time, felt like they were relatively protected from the downside risk – maybe they say a little more upside potential than downside risk there.”

The Eagle Ford Shale in South Texas saw a flurry of oil-focused deal activity in the first quarter. Chesapeake Energy Corp. lined up two divestitures totaling nearly $3 billion to offload a significant portion of its oily Eagle Ford acreage.

And Canadian E&P Baytex Energy reached a deal to acquire Eagle Ford pure-play Ranger Oil for $2.5 billion earlier in March.


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Since the second half of 2022, M&A has been dominated by the Eagle Ford’s resurgence, with more than $10 billion in deal value, according to Mercer Capital.

“Significant volumes of wet gas, NGLs and rich condensate, combined with the proximity to the Port of Corpus Christi,” has made the mature shale play a center of M&A activity, according to a March 17 report by Mercer.

The report noted that the Corpus Christi port is the home of a processing and export market that hit an all-time high for crude oil exports in December 2022, exceeding 70 million barrels (MMbbl) in a month for the first time in its history. The Port of Corpus Christi accounted for roughly 60% of all U.S. crude oil exports for all of 2022, according to research firm RBN Energy.

The oil-heavy Permian Basin, as usual, continued to see sizeable M&A activity. On March 23, VTX Energy Partners, the U.S. upstream arm of Swiss-based Vitol, closed an acquisition of 35,000 net leasehold acres in the Delaware Basin. The VTX deal, announced in January, was likely in the range of $1.5 billion to $2 billion, Dittmar said.

Other, smaller deals include Oklahoma City-based Riley Exploration Permian Inc., which agreed to pay $330 million in cash to acquire oil and gas assets on the New Mexico side of the Permian in February.

But the large value of those transactions has obscured a market in which deal activity has been thwarted by oil and gas volatility.

Crude crunch

Oil deals were flowing earlier this quarter, but market conditions have changed since the start of the year. In recent weeks, a major banking liquidity crisis and multiple regional bank failures in the U.S. stoked fears of a broader economic recession, pushing oil prices lower.

WTI crude prices closed out at a 2023-low of $66.61/bbl on March 17 – the lowest WTI has sunk since December 2021, according to the U.S. Energy Information Administration.

“I think [the banking crisis] is probably what’s thrown a wrench in the market,” Dittmar said. “It’s just how rapidly oil prices collapsed, and how much uncertainty there is around the global outlook for economic growth through first and middle parts of 2023.”

Oil prices have made up some of their losses in recent days; WTI futures for May traded up more than 5% at $72.81/bbl on March 27. While oil prices aren’t expected to reach levels seen in 2022, Dittmar said he thinks prices should continue to rebound back up to a more preferred pricing range this year.

On the flip side, if crude prices continue to fall, the market for energy acquisitions and mergers could heat back up.

“It will be interesting to see if there ends up being a significant slide in WTI prices if [M&A] gets picked up again,” said James Taylor, senior analyst with East Daley Analytics.

U.S. crude oil prices have seen volatility in recent weeks. But natural gas prices have consistently spiraled downward since late last year due to oversupply and weaker-than-expected global demand.

After averaging $6.42/MMBtu in 2022, Henry Hub gas prices are expected to average around $3/MMBtu this year, according to the latest forecasts by the U.S. Energy Information Administration earlier this month.

Natural gas futures for April delivery fell over 5% to trade at around $2.09 on March 27.


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The extreme volatility in gas prices effectively shut down the market for M&A in gas-heavy basins this year, Dittmar said.

The only announced gas deal of consequence this quarter was Diversified Energy Co.’s acquisition of Texas upstream assets from Tanos Energy Holdings II LLC for $250 million, he said.

“At this kind of pricing, if they feel like they can wait it out, you get some relief in the next 12 to 24 months,” Dittmar said. “I imagine that’s probably what’s happening on the gas side.”

Several natural gas-focused players, such as  Chesapeake and Marcellus gas giant EQT Corp., see a runway to higher global gas demand – and higher gas pricing – in 2025 and 2026 when new LNG export projects start up on the Gulf Coast.

“I think there are a lot of sellers sitting out that aren’t willing to let their gas go at a $2.25/MMBtu price when they say that could be doubled in the next couple of years,” Dittmar said.

Austin Chalk, Permian deals in play

A rebound in the gas M&A market might take time to recover, but don’t be surprised to see deals centered around crude oil production later this year.

As part of Chesapeake’s exit from the Eagle Ford, the company still has approximately 21,000 bbl/d of oil and NGL production and 80 MMcf/d of natural gas production remaining in its Eagle Ford position.

Chesapeake is in discussions with potential buyers for the remainder of its Eagle Ford footprint, which includes acreage in the Austin Chalk play.

And Houston-based private equity group EnCap is reportedly looking to sell multiple portfolio companies operating in the Permian’s Delaware and Midland sub-basins that could fetch more than $6 billion, Bloomberg reported.