Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, is releasing its summary of 1Q2025 upstream M&A activity and outlook for the rest of the year. The M&A summary follows Enverus’ release of Investor Analytics, a new cutting-edge solution designed to offer investors a comprehensive view of key market dynamics.
Upstream M&A opened 2025 with $17 billion in deal value, the second-best start to a year since 2018. However, activity was disproportionately driven by one company, Diamondback Energy, which accounted for nearly 50% of total value between its acquisition of Double Eagle IV and a dropdown of minerals to its affiliate Viper Energy Partners. Outside of Diamondback, buyers were already feeling the pressure of limited acquisition opportunities and high asking prices for undeveloped drilling inventory. On top of that, upstream companies will now have to navigate significant headwinds from falling oil and equity values.
'Upstream deal markets are heading into the most challenging conditions we have seen since the first half of 2020. High asset prices and limited opportunities are colliding with weakening crude,' said Andrew Dittmar, principal analyst at EIR. 'Potential sellers are acutely aware of the scarcity of high-quality shale inventory, creating a reluctance to unload their assets at a discount. Buyers on the other hand were already stretched by M&A valuations and can’t afford to continue to pay recent prices now that oil prices are lower. The standoff between those two groups around fair asset pricing is set to sink M&A activity.'
Top Five Upstream Deals of Q1 2025
Source: Enverus M&A Analytics
Prior to OPEC and tariffs creating waves in oil markets, pricing for quality shale inventory was a perpetually rising tide. Diamondback set a record in the Permian Basin with its acquisition of Double Eagle IV. The private equity sponsored E&P was able to garner such a large premium for its land because high consolidation over the last few years has left few attractive private companies for the public E&Ps to target. The sale of Double Eagle at about $7 million per undeveloped location topped the previous high-water mark for Permian inventory set by Occidental’s purchase of CrownRock in late 2023. Factoring in Diamondback’s purchase, oil-weighted inventory was on track to record its fifth consecutive year of escalating prices.
'Permian land has been prioritized for acquisitions by companies because the high-quality inventory there can generate strong returns through the commodity price cycle. It is also the basin that keeps giving with operators consistently adding locations by testing new zones of the prolific basin’s stacked pay,' said Dittmar. 'With oil prices dropping, whatever buyers are in the market are likely to redouble efforts to pick up high-quality locations held by private companies like FireBird Energy II and TRP Energy in the Permian and will be less interested in private opportunities in plays like the Eagle Ford and Bakken that had been gaining momentum as a cheaper alternative but have less economic inventory.'
Historically, lower crude prices have taken the wind out of the sails of upstream M&A. Going back to the start of 2014, oil prices have fallen by more than 5% quarter-over-quarter 17 times. In 11 of the quarters with materially lower crude prices, deal activity fell compared to the prior three months with an average decline in transacted deal value of 30%.
Q/Q Change in Deal Value vs. WTI Price
Source: Enverus Intelligence® Research, Enverus M&A Analytics, FactSet
Asset values have also declined when crude prices moved 20% or more lower year-over-year, with the value of Permian acreage falling about one-third in 2015 compared to 2014 and losing more than half its value in 2020 over 2019, based on the average price per acre paid. The only exception to the trend over the last ten years of lower oil leading to lower asset prices was 2023, when crude came off its 2022 highs, but buyers continued to bid up the value of undeveloped inventory. That year oil still averaged a relatively strong $78/bbl though, different from a move towards the lower end of its cyclical trading range that 2025 is witnessing.
A significant distinction between this downturn in oil and past cycles is that publicly traded E&Ps are relatively well positioned to withstand lower prices, at least for this year. After seeing a wave of reorganization previously when crude lost its footing, companies have kept debt levels in check, been conservative about growing production and made judicious use of hedges. That puts most E&Ps in a good position to maintain operations for the remainder of 2025, although the challenge they face increases if low prices persist into 2026. 'If oil prices struggle into 2026, public E&Ps are likely to start taking more drastic actions including cutting capital spending, selling assets or even considering mergers with another company,' said Dittmar.
A potential bright spot for M&A is natural gas with significant interest in adding assets with access to Gulf Coast markets from multiple buyer groups, including international buyers and private capital. While near-term gas prices are also being challenged in the broad market selloff, future prices still look strong with a secular shift in demand from liquified natural gas export facilities and secondary demand from datacenters. That is leading to high demand for Haynesville natural gas assets compared to the available opportunities from private sellers or non-core asset sales. Potential buyers may also consider adding exposure to other areas like the Eagle Ford natural gas window or Mid-Continent.
Using Enverus newest AI tool, Investor Analytics, to summarize comments about M&A markets from management teams in recent earnings calls reveals companies were already concerned about the asking prices for deals and available opportunities. One of the challenges highlighted with available opportunities is the mix of production compared to drilling locations, with many of the larger available acquisition opportunities skewed towards existing production rather than undeveloped inventory. That is a challenge for companies that want to use deals principally to extend overall inventory life. Some companies like Permian Resources have responded by focusing on smaller transactions and bolt-on deals that its management team says have higher-quality inventory and represent better value compared to larger deals.
One option for inventory-strapped U.S. producers is to consider acquisition opportunities in other countries including Canada. The Montney in Canada has consistently demonstrated better value for buyers than the U.S. shale plays, including from the recent merger of Whitecap Resources and Veren that implied less than $1 million each paid for Veren’s remaining inventory. However, these deals have still nearly all been acquired by Canada-based companies. Private Continental Resources looked even further abroad in signing a joint venture in Turkey. As a private operator, the company has more flexibility to pursue exploration ventures than a public E&P whose shareholders would likely react negatively to a similar move. Another hotbed of activity internationally is the Vaca Muerta shale in Argentina, where regional specialist Vista Energy recently acquired a block from Petronas at what looks to be an attractive acquisition price.
'Volatility and lower prices make deals tough right now but will create opportunities for nimble buyers with a longer-term outlook,' said Dittmar. 'A temporary bottleneck in deal making will create a backlog of latent demand, and activity should rebound once prices start to improve. Private equity firms, for example, have been raising fresh funds after selling out over the last few years and will be ready to hop back into the market once prices stabilize. Those firms and the large-cap E&Ps with strong balance sheets are likely to be the ultimate winners from the volatility.'
Andrew Dittmar will host a panel on M&A at EVOLVE 2025, Enverus’ upcoming three-day conference held May 12-15, 2025, at the Hilton Americas in downtown Houston, where visionaries converge to shape the future of energy. A press room and hospitality suite will be available for journalists at EVOLVE, where they can meet with Enverus subject matter experts and schedule one-on-one interviews.
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Source: Enverus
