US Energy M&A Shifts Gassier into Appalachia, Midcon as Oil Slips

U.S. upstream dealmaking continued at a normal pace in April, despite a 12% collapse in WTI crude prices.

Dealmaking across all sectors fell to a 20-year low in April due to tariff and trade uncertainty in the wake of the Trump administration’s “Liberation Day” shakeup.

Experts say it’s still too early to see a material drop-off in upstream oil and gas M&A activity, which continued at a relatively typical clip last month.

U.S. upstream M&A activity totaled approximately $2.3 billion across five transactions in April, according to Enverus Intelligence Research (EIR) data.

April was bolstered by EQT Corp.’s $1.8 billion acquisition of private Marcellus E&P Olympus Energy.

Natural gas was the focus of the EQT-Olympus deal, so the transaction was affected less by the recent downturn in oil prices, said Andrew Dittmar, EIR’s principal M&A analyst.

While oil prices hover around $60/bbl, natural gas prices are rallying on increasing demand from LNG export projects on the U.S. Gulf Coast.

Henry Hub futures prices average $4.25/MMBtu over the next 12 months; 24-month strip is $4.24/MMBtu.

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Natural gas M&A

Depressed oil prices are shifting drilling and M&A activity toward gassier prospects, particularly in Appalachia, Haynesville and the Midcontinent.

Midcontinent-focused Mach Natural Resources closed a $60 million acquisition of XTO Energy assets in Oklahoma, Kansas and Wyoming’s Green River Basin on April 30.

The deal includes around 990,000 net acres, growing Mach’s total portfolio up to 2.1 million net acres. The XTO deal also included around 180,000 net mineral acres.

Mach CEO Tom Ward—who previously co-founded Chesapeake Energy and SandRidge Energy—said the XTO deal includes 79% natural gas, 14% oil and 7% NGL.

In the Marcellus, EQT’s acquisition of Blackstone-backed Olympus includes 90,000 net acres in southwest Pennsylvania, adjacent to EQT’s core portfolio. Net production averages 500 MMcf/d.

At maintenance activity levels, Olympus holds over a decade of high-quality Marcellus inventory and another seven years in the deeper Utica bench.

Gulfport Energy, another publicly traded Appalachian E&P, is considering using its free cash flow for M&A this year, the company said in first-quarter earnings.

Gulfport’s privately owned neighbors in the Utica, Ascent Resources and Encino Energy, are both reportedly in play.

In the natural gas minerals space, WhiteHawk Energy inked a deal to take publicly traded PHX Minerals private. WhiteHawk will pay $4.35 per PHX share, or around $187 million, including PHX’s net debt.

The deal adds PHX’s portfolio of 1.8 million gross unit acres in the Haynesville, Anadarko Basin and Fayetteville gas plays to WhiteHawk’s assets. WhiteHawk already owns 1.3 million gross unit acres in the Marcellus and Haynesville shales.

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Oil M&A

Despite price volatility, oil deals are also getting signed.

Permian Resources inked a $608 million acquisition of northern Delaware Basin assets from Apache parent APA Corp.

The deal includes 13,320 net acres and 8,700 net royalty acres in New Mexico, near some of Permian Resources’ core operating areas. Production from the assets is expected to average 12,400 boe/d (46% oil) in 2025.

In New Mexico’s Northwest Shelf, Riley Exploration Permian acquired privately held Silverback Exploration II for $142 million.

Silverback, backed by private equity firm EnCap Investments LP, holds 47,000 net acres in Eddy County, New Mexico. Recent production from the acquired assets was 5,000 boe/d (52% oil, 75% liquids).

Riley Permian estimates around 19,000 net acres (79% undeveloped) are prospective for the Yeso Trend, one of the company’s main development areas. Riley mainly targets the Yeso’s Paddock and Blinebry formations.

And in the Eagle Ford, EOG Resources made a rare M&A transaction to strategically extend laterals. The $275 million deal with Arrow S Energy includes 30,000 net acres contiguous with EOG’s existing Eagle Ford footprint.

Analysts estimate the area holds a potential 120 undeveloped 3-mile locations and 180 undeveloped 2-mile locations.

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Challenges ahead

While first-quarter M&A didn’t slow, experts believe commodity price volatility will chill deal activity moving forward.

“Upstream deal markets are heading into the most challenging conditions we have seen since the first half of 2020,” Dittmar said. “High asset prices and limited opportunities are colliding with weakening crude.”

Potential sellers are aware of this scarcity and are hesitant to sell assets for a discount. Buyers, on the other hand, can’t continue to afford to pay recent deal prices now that oil prices have collapsed.

“The standoff between those two groups around fair asset pricing is set to sink M&A activity,” he said.

In 11 of the last 17 quarters when oil dropped by over 5%, deal volume fell by 30% on average, per EIR data.

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