Volatility to Slow Upstream M&A After $17B in Q1 Dealmaking—Enverus

U.S. upstream M&A totaled $17 billion in the first quarter, the second-best start to a year since 2018, according to Enverus Intelligence Research (EIR).

The caveats: most of that activity came from Diamondback Energy, while nearly everyone else remained stagnant.

The rest of the market faces significant headwinds, including collapsing oil prices, high valuations for remaining inventory and dwindling viable M&A opportunities.

“Upstream deal markets are heading into the most challenging conditions we have seen since the first half of 2020,” said Andrew Dittmar, principal M&A analyst for EIR.

“Potential sellers are acutely aware of the scarcity of high-quality shale inventory,” he said.

As oil prices fall, sellers will be reluctant to part with their assets at a discount.

Buyers—already stretched thin by sky-high asset valuations—can’t continue to pay at those high levels with sinking oil prices.

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

It’s a story that’s played out before. In 11 of the last 17 quarters when oil dropped over 5%, deal volume fell by 30% on average.

Diamondback strikes

Diamondback had a red-hot start to 2025, unveiling over $8 billion in Permian A&D activity in the first quarter.

The company’s $4.1 billion cash-and-stock acquisition of Double Eagle IV added 40,000 net acres in the Midland Basin. Double Eagle’s acquired production averaged around 27,000 boe/d (69% oil).

The Double Eagle deal “set a record” in the Permian, with Diamondback paying an expensive $7 million per undeveloped location for the scarce Midland Basin inventory, Dittmar said.

That topped a previous record set by Occidental’s acquisition of Midland E&P CrownRock in late 2023.

But the Double Eagle acquisition was just Diamondback’s second-largest deal of the quarter.

The largest first-quarter M&A transaction was Diamondback’s “drop down” of Permian mineral and royalty interests to subsidiary Viper Energy.

When Diamondback made a transformational $26 billion acquisition of Endeavor Energy Resources last year, the deal included a significant portfolio of mineral and royalty interests aggregated over decades by Endeavor founder Autry Stephens.

The drop-down deal, as well as a smaller $300 million acquisition by Viper, will add 23,100 net royalty acres (NRAs) to Viper’s portfolio. Diamondback will operate over 70% of the incremental Midland Basin acreage.

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Gas a ‘bright spot’

As oil markets languish in volatility, “a potential bright spot for M&A is natural gas,” Dittmar said.

Buyers are looking to get ahead of rising natural gas demand to fuel LNG exports on the Gulf Coast.

“That is leading to high demand for Haynesville natural gas assets compared to the available opportunities from private sellers or non-core asset sales,” he said.

The fourth-largest M&A deal in the first quarter was Citadel’s $1.2 billion acquisition of Haynesville E&P Paloma Natural Gas in February.

The deal included around 60 undeveloped Haynesville locations on the Louisiana side of the basin.

On March 31, Chevron announced a $525 million sale of 70% of its East Texas Haynesville assets to TG Natural Resources, a subsidiary of Japanese utility Tokyo Gas.

Secondary targets outside of Haynesville include the Eagle Ford’s dry gas window or the Midcontinent, where M&A interest is heating up.

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Shale goes global

Dwindling attractive M&A opportunity is pushing some E&Ps farther from home and into international markets.

Private Continental Resources signed a joint venture (JV) to explore for oil and gas resource in Turkey.

Public wildcatter EOG Resources signed a deal to develop Bahrain’s onshore tight-gas sandstone.

M&A activity is picking up in other North American shale plays. Canada’s Montney Shale “consistently demonstrated better value for buyers than the U.S. shale plays,” Dittmar said.

The recent merger between Whitecap Resources and Veren implied less than $1 million per location for Veren’s undrilled inventory.

Another international hotspot is Argentina’s Vaca Muerta shale, where Vista Energy acquired a block from Petronas “at what looks to be an attractive acquisition price,” Dittmar said.