Oil and gas deals are poised to get considerably smaller in 2025, according to Enverus Intelligence Research. (Source: Shutterstock)
Following $300 billion of M&A in the past two years, deals are poised to get considerably smaller, according to a 2025 outlook released by Enverus Intelligence Research (EIR) on Jan. 21.
More than half of that figure—$188 billion—has been the rush by public companies to consolidate, with 11 public deals of more than $2 billion and fewer targets to pursue.
EIR expects average deal size to fall and breakeven economics of acquired inventory to rise in 2025.
“The quality of acquired inventory has already declined, averaging a $50/bbl breakeven in 2024 versus $45/bbl in 2022-23,” EIR said. “The pool of available remaining private equity assets is largely smaller, higher on the cost curve or both.”
However, the report also forecasts Brent oil to average $80/bbl pricing, based on OPEC+ slowly unwinding production cuts and the assumption that Chinese liquids demand will be flat year-over-year.
Despite quality concerns, a need for scale and duration will motivate small- and mid-cap E&Ps to pursue these opportunities, EIR said.
“Operational synergies like long laterals will be critical to improving economics on the available marginal acreage, with an estimated ~$5/bbl breakeven benefit to an incremental mile,” the report said.
The report also said that long laterals, which have helped drive down well costs, will continue to be a major catalyst for improving economics in 2024.
“We expect the trend will accelerate in 2025 with broader utilization of 3-mile laterals and a pivot to 4-mile wells by select operators,” the report said.
Public companies’ mergers are also expected to slow this year from the recent average of five per year, EIR said.
“While public companies hold nearly 90% of the remaining operated sub-$50/bbl breakeven inventory in oil-weighted major U.S. basins, ~85% of this inventory is held by operators with enterprise values exceeding $20 billion,” EIR said. “These companies are not near-term motivated sellers for either corporate or asset deals. SMID-cap corporate deals offer suppressed valuations relative to private opportunities, but the lack of a strategic fit and agreement on go-forward management teams present headwinds.”
Recommended Reading
Wildcatting is Back: The New Lower 48 Oil Plays
2024-12-15 - Operators wanting to grow oil inventory organically are finding promising potential as modern drilling and completion costs have dropped while adding inventory via M&A is increasingly costly.
Classic Rock, New Wells: Permian Conventional Zones Gain Momentum
2024-12-02 - Spurned or simply ignored by the big publics, the Permian Basin’s conventional zones—the Central Basin Platform, Northwest Shelf and Eastern Shelf—remain playgrounds for independent producers.
Formentera Joins EOG in Wildcatting South Texas’ Oily Pearsall Pay
2025-01-22 - Known in the past as a “heartbreak shale,” Formentera Partners is counting on bigger completions and longer laterals to crack the Pearsall code, Managing Partner Bryan Sheffield said. EOG Resources is also exploring the shale.
Huddleston: Haynesville E&P Aethon Ready for LNG, AI and Even an IPO
2025-01-22 - Gordon Huddleston, president and partner of Aethon Energy, talks about well costs in the western Haynesville, prepping for LNG and AI power demand and the company’s readiness for an IPO— if the conditions are right.
Watch for Falling Gas DUCs: E&Ps Resume Completions at $4 Gas
2025-01-23 - Drilled but uncompleted (DUC) gas wells that totaled some 500 into September 2024 have declined to just under 400, according to a J.P. Morgan Securities analysis of Enverus data.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.