U.S. Oil M&A Jumps as Private Equity Unloads Shale Assets

U.S. oil exploration and production deals last quarter soared to $24 billion – nearly three times that of the first quarter, energy analytics firm Enverus disclosed on Tuesday.

There were 20 deals with an average value of $1.8 billion as a stable U.S. oil price outlook has encouraged private-equity buyers to exit properties. Oil futures are trading between $74 and $77 per barrel through April 2024.

The surge was due in part to energy focused private equity firms EnCap Investments and NGP Energy Capital selling off a combined six portfolio companies. In total, $14 billion in private equity-owned assets have changed hands this year, Enverus said.

“The formation of new private-equity backed E&Ps hit its peak in 2017 and now, six years later those investments are being unwound via sales to public companies,” said Andrew Dittmar, an Enverus director.

Private equity firms have moved away from oil deals, with only 10 new exploration and production firm investments this year compared to 100 per year last decade, Enverus said.

“Those investors saw an opportunity to monetize deals they had held longer than normal” and exit at higher valuations than were possible a few years ago, said Jon Platt, a Baker Botts LLP attorney who specializes in private equity and energy M&A.

Most M&A was in the top U.S. shale field as companies looked to add oil acreage, Enverus’ Dittmar said. Ovintiv spent $4.3 billion on three Permian Basin acquisitions, and Civitas Resources spent a combined $4.7 billion for two private-equity owned properties.

The quarter’s biggest deal was Chevron’s $7.6 billion bid for PDC Energy.

Noticeably absent from deals in the first half were natural gas production companies, said Dittmar. U.S. gas prices trade for less than half what they did a year ago on flat export demand and gains by renewables at utilities.