The relentless pace of transactions in the US shale sector signals that industry players are gearing up for a future with limited growth opportunities. This trend is highlighted in a recent report by Enverus Intelligence Research, which revealed that the US tight oil business has witnessed its third consecutive quarter of deals surpassing $30 billion.
As of now, Enverus has recorded nearly $90 billion in transactions for 2024, with a 12-month total nearing $250 billion. Notably, quarterly deal value has topped $30 billion only three times since 2017, indicating a recent uptick in dealmaking activity.
This surge in quarterly values is attributed to a mix of significant transactions alongside smaller deals. For instance, the first quarter of this year saw Diamondback Energy’s $26 billion acquisition of Endeavour Energy. In the most recent quarter, ConocoPhillips announced its $22.5 billion purchase of Marathon Oil.
Andrew Dittmar, a principal analyst for Enverus Intelligence Research, noted that previously inactive companies, such as ConocoPhillips, Devon Energy, and SM Energy, have made significant moves to achieve greater scale. “For ConocoPhillips and Devon Energy, running out of inventory isn’t a major concern. However, successfully navigating the maturing phase of shale still requires building a resource base through M&A,” Dittmar explained.
These insights come on the heels of several recent shale deal announcements. On July 29, Occidental Petroleum (Oxy) sold assets in Texas and New Mexico to Permian Resources for nearly $818 million. This transaction included 29,500 net acres in the Permian Basin’s Delaware Basin, where production is approximately 15,000 barrels of oil equivalent per day (BOE/D).
Additionally, Oxy finalized separate deals totaling nearly $152 million for other properties. The sale of the Delaware Basin assets is part of Oxy’s previously announced plan to divest up to $6 billion in non-core assets to help finance its $12 billion acquisition of CrownRock, announced in 2023.
On July 28, Tulsa-based Vital Energy announced a joint purchase agreement to acquire Point Energy Partners for $1.1 billion in cash. Vital will retain 80% of Point Energy, while Northern Oil and Gas will assume the remaining 20% stake. Vital plans to fund its $820 million share of the acquisition using its credit facility, recently increased to $1.5 billion.
The acquisition includes 49 net drilling locations with an average breakeven oil price of $47 per barrel. Current production of the asset is around 30,000 BOE/D, resulting from a 15-well program executed in March. However, Vital expects production to stabilize at 15,500 BOE/D (64% oil) by year-end due to natural declines and a moderated drilling program involving one rig and seven new wells.
Separately, Post Oak Minerals announced on July 29 that it agreed to buy a large-scale mineral and royalty interest position in the Permian for $475 million. The Houston-based investment group said the sellers included Apache Corp., Hunt Oil Company, family offices, and individual owners.
Dittmar suggested that the deals led by Vital and Oxy likely represent the future of the region’s dealmaking, as “large, core acquisition opportunities in the Permian are increasingly rare.”
Enverus sees the key driver behind recent shale deals as the rising price of untapped drilling locations. Dittmar noted that premium pricing for high-quality rock has led to “a scramble for middle-tier inventory that provides strong returns even if it isn’t as economic as core Permian assets.”
This trend explains the uptick in deals focused on the Eagle Ford Shale and, to a lesser extent, the Bakken Shale in North Dakota. While both are mature plays, they remain attractive due to the recently emerged potential of adding production and reserves through the refracturing of existing, typically suboptimally completed wellbores.
Enverus highlighted that refracturing played a significant role in the recent deals made by Devon and ConocoPhillips, which reported their acquisitions included 300 and up to 1,000 refrac candidates, respectively.
Outside of those considering large refracturing programs, some US oil companies have shown an appetite for more traditional risks by buying into relatively undeveloped regions. This includes SM Energy’s announced purchase of XCL Resources’ Uinta Basin assets in Utah. Dittmar explained that while such deals represent a cost-effective strategy for increasing well inventory, they reveal a market shift where operators “are willing to prepay for inventory” before it is fully proven.
Another important theme of the current shale M&A trend is the push by private operators to sell to publicly traded counterparts. More than $100 billion worth of private equity or family-owned oil and gas properties have traded hands with public companies since 2022.
Enverus noted that “there is still room” for more private equity firms to unload their portfolios, especially in the Eagle Ford and Oklahoma’s SCOOP/STACK play, where several viable acquisition targets remain.
