US Upstream Oil and Gas Deal Making Surges to $105 Billion in 2024

The US upstream oil and gas industry has witnessed a remarkable surge in dealmaking activity, with a total of $105 billion in mergers and acquisitions (M&A) announced in 2024, according to Enverus. This figure represents a significant increase from the previous year and highlights the continued appetite for consolidation and expansion in the sector.

The robust dealmaking activity can be attributed to several key factors, including the ongoing consolidation in core areas, resource expansion, private equity exits, and strategic portfolio adjustments. These factors have contributed to the strong performance of the US upstream M&A market in 2024.

One of the primary drivers of deal activity has been the consolidation in core areas, such as the Delaware and Midland basins. However, as available assets in these basins become scarce, buyers are increasingly looking to expand their opportunity set by acquiring assets in other basins. This trend has led to a power shift, with non-Permian assets taking center stage in the future North American deals pipeline.

Resource expansion has also played a significant role in shaping the US upstream M&A landscape. Buyers are actively seeking to acquire assets in other basins to expand their resource base and tap into new opportunities. For example, ConocoPhillips highlighted over 1,000 acquired Eagle Ford refrac candidate wells as part of its go-forward opportunity set, while Devon Energy emphasized Grayson Mill's roughly 300 refrac candidates in the Bakken. SM Energy, acquiring XCL in conjunction with Northern Oil & Gas, highlighted the competitiveness of the Uinta play.

Private equity exits have also contributed to the deal activity in 2024. Private equity firms are looking to exit their investments, creating opportunities for both public and private companies to acquire assets. In Q2 2024, two EnCap portfolio companies—Ameredev II and XCL Resources—were acquired for a combined $4.45 billion.

Strategic portfolio adjustments have further invigorated the US upstream M&A market. Major oil and gas companies are divesting non-core assets to focus on core operations and growth. For instance, ExxonMobil plans to divest approximately $10 billion to $15 billion of assets by 2028, while Occidental Petroleum (Oxy) plans to divest between $4.5 billion and $6 billion. Diamondback Energy's portfolio adjustments have also contributed to short-term M&A activity.

The distribution of deal values across different basins and play types has significantly influenced the overall market dynamics in 2024. The Permian Basin has led the way in terms of deal activity, accounting for 46% of the total M&A deal value. However, the Permian Basin's dominance has led to a scarcity of available assets, driving deal-hungry players to look outside the basin for acquisitions. Other shale plays, such as the Eagle Ford and the Uinta Basin, have gained traction as buyers seek to expand their footprint in an increasingly competitive market.

In conclusion, the US upstream oil and gas industry has witnessed a remarkable surge in dealmaking activity in 2024, driven by factors such as consolidation in core areas, resource expansion, private equity exits, and strategic portfolio adjustments. The distribution of deal values across different basins and play types has significantly influenced the overall market dynamics, with the Permian Basin leading the way in terms of deal activity. As the market continues to evolve, it will be interesting to see how these trends shape the US upstream M&A landscape in the coming years.