Push for Permian positions drives record number of energy M&As in first quarter

Mergers and acquisition activity in the oil and gas sector hit record levels for the first three months of the year with deals totalling $51 billion in value. A report by energy and analytics company Enverus Intelligence Research (EIR) highlighted the number, with the US Permian Basin cited as driving many deals.

It follows a bumper previous year for upstream consolidation in the US when $192 billion in transactions took place, according to EIR.

Firms seeking a piece of Permian

Andrew Dittmar, principal analyst at EIR, said deals at the start of 2024 were driven by the same factors that led to last year’s marathon of mergers, “foremost among them a desire to lock up high-quality inventory when it is available”. He continued: “Most of that inventory is going to be found in the Permian, so it is unsurprising the prolific basin was yet again the primary driver for M&A within oil and gas.”

EIR does, however, dampen the idea of another record-setting year by revealing that deal activity has “slowed significantly” in March and Q2 appears to have lost momentum.

Headline acts

The largest consolidation tracked by EIR in the opening quarter was the $26 billion sale of privately held Endeavor Energy Resources to public company Diamondback Energy. The company beat larger rivals to a purchase that gives it a scale comparable to Pioneer Natural Resources, prior to its sale to ExxonMobil. EIR confirms that APA also expanded in the Permian, buying Callon Petroleum for $4.5 billion to significantly expand its shale inventory. Dittmar says those two deals, plus a few smaller bolt-on acquisitions, gave the Permian a 60% share of total transacted upstream value.

Looking forward

That momentum may not endure, however. The analyst explained that there were a handful of other private family companies that would be highly sought after if they looked to sell.

“However, there are no indications these closely held companies are looking to exit any time soon,” he said. “That leaves public E&Ps looking to scoop up the increasingly thin list of private E&Ps backed by institutional capital and built with a sale in mind - or figuring out ways to merge with each other.”

Dittmar said that continued public company consolidation looked to be the most likely route to keep M&A markets on track, both in the Permian and other plays such as the Haynesville shale play in Texas.

He said the latter experienced significant consolidation when Chesapeake Energy and Southwestern Energy merged. That public deal substantially boosted Chesapeake’s exposure to the Haynesville and opportunity to capture premium gas prices from burgeoning LNG exports, beginning next year.

Advisers banking big

Meanwhile, advisers benefitted well from the flurry of deals, according to GlobalData.

Latest updates to its Financial and Legal Adviser League Tables - which rank advisers by the total value and volume of M&A deals they advised on in the oil and gas sector - has Citi topping the list during 2024’s first quarter.

An analysis of GlobalData’s Deals Database reveals the company advised on six deals worth $43.5 billion.

JP Morgan was just behind, in terms of value, by advising on $39.9 billion worth of deals, followed by Goldman Sachs with $33.4 billion, Jefferies with $28.1 billion, and RBC Capital Markets at $23.4 billion.

Evercore occupied the second position in terms of volume with six deals, followed by RBC Capital Markets, Wells Fargo, and Piper Sandler.

Legal eagles

Wachtell, Lipton, Rosen & Katz and White & Case topped the ranking of M&A legal advisers in the oil and gas sector during Q1 2024, by value and volume, respectively, according to the GlobalData table.

The former of those achieved its leading position in terms of value by advising on $44.6 billion worth of deals.