• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 2 days How Far Have We Really Gotten With Alternative Energy
  • 2 hours The United States produced more crude oil than any nation, at any time.
  • 4 days Bad news for e-cars keeps coming
Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

More Info

Premium Content

The Next U.S. Shale Patch Consolidation Has Yet To Begin

  • Both the value and volume of upstream oil and gas deals fell in the first quarter of 2023 despite talk of a wave of mergers and acquisitions.
  • The value of the deals was 20% lower than the Q1 average since 2016, with most of that value coming from mature plays in the Eagle Ford.
  • Analysts expect the Permian Basin to lead the next wave of deals, and M&A activity could pick up pace later in the year.

The value and volume of U.S. upstream oil and gas deals fell in the first quarter of the year as companies focused on mature plays and are still watching and waiting for opportunities to snap up undeveloped acreage in the Permian. 

As market talk about the next wave of mergers and acquisitions in the U.S. shale patch intensified, research showed that 2023 picked up where 2022 left off – with fewer deals with a lower total value. 

M&A activity could pick up pace later in 2023, and the first-quarter underwhelming deal-making tally may not be indicative of this year’s acquisitions in the shale patch, analysts say. 

“Outlier” Q1 

While everyone expects deals in the Permian in the race to secure unexhausted Tier 1 drilling locations, the first quarter of 2023 saw quite different types of deals and locations, to the point of analysts saying that Q1 was an “outlier” in the U.S. upstream deal-making.  

Just 16 deals were made in the U.S. upstream in the first quarter, with a multi-year collapse of 80% less than the Q1 average, Enverus Intelligence Research (EIR) said in a report this week. The value of the deals came in at a total of $8.6 billion, which was down by around 20% compared with the first-quarter average since 2016. Most of the value of the deals was made up of transactions in the mature Eagle Ford shale play, which saw a surprising resurgence, Enverus notes.


“Last quarter was an outlier in terms of the deal targets and types for upstream transactions,” said Andrew Dittmar, director at Enverus. 

“Rather than public E&Ps focusing on buying undeveloped inventory in the Permian Basin from private companies, most of the deals targeted mature assets in the Eagle Ford and included more public-to-private transactions plus a corporate merger.” 

In total deals in U.S. oil and gas, including not only upstream but also the midstream and downstream subsectors, the volume of deals collapsed by 35% quarter-over-quarter to 74 deals in the first quarter of 2023, according to a KPMG analysis. Total deal value slumped by 47% QoQ to $14.8 billion, for the lowest in at least two years. 

“Demand for both O&G and chemicals remained resilient, and deal activity may increase later this year, but for now, deal makers maintain a wait-and-see attitude,” KPMG said.

Overall, the energy, natural resources, and chemicals sector showed in the first quarter that “deal makers can still put together impressive, multibillion-dollar transactions but prefer to remain cautious until monetary and market conditions improve,” said Michael Harling, Partner Deal Advisory & Strategy ENRC Leader at KPMG.  

Back to the U.S. upstream, the biggest deal in the first quarter was Calgary-based Baytex Energy buying Houston-based Eagle Ford pure-play Ranger Oil for $2.5 billion. Baytex Energy thus entered the Eagle Ford, as did one of the world’s largest chemical makers, UK-based INEOS, which entered U.S. oil and gas production after agreeing to buy Eagle Ford assets from Chesapeake Energy for $1.4 billion. The INEOS deal was the fourth-biggest in terms of value in the U.S. upstream in the first quarter.  

“The Eagle Ford has a lack of home-grown consolidators and has remained fragmented,” Enverus’s Dittmar said. 

The maturity of Eagle Ford has drawn buyers from outside the U.S. over the years, thanks to the shale play’s established production and ease of access to Gulf Coast markets, he added. 

“We view the Eagle Ford as an optimal place to buy production-heavy assets, and some inventory, but it is generally not the ideal play for companies needing a big chunk of undeveloped acreage to be looking,” Dittmar noted. 

The Permian Is The Place To Go For Undeveloped Assets 

For undeveloped acreage, companies must turn to the Permian, he says. 

Other analysts concur and expect the Permian to lead the next wave of large M&A deals in the shale patch. 

Record cash flows in the industry and dwindling inventory of prime drilling locations for many smaller producers have set the stage for a new raft of consolidation in the U.S. oil industry. This year, the M&A activity is expected to move into a higher gear as private equity looks for the exit while public companies look for additional top-tier acreage, analysts say.  


Less than two months before the Exxon-Pioneer rumors surfaced last month, McKinsey & Company said in an analysis, “Historically high cash generation across the North American upstream industry could create the perfect market conditions for accelerated M&A activity for market leaders.”   

Currently, public companies are looking for private E&Ps to acquire, while private equity firms are looking for non-core assets put up for sale by public operators, Enverus’s Dittmar said in the Q1 report this week. 

Smaller producers face a “catch-22” dilemma in their efforts to gain access to more inventory for drilling, Dittmar notes. Those firms need more drilling acreage to boost valuations, but they need higher market valuations to be able to afford said acreage, he added.  

Commenting on the Q1 highlights, Dittmar said, “M&A may have slowed, and shale may be in its later innings, but there are still opportunities to be had.”

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • Terrel Shields on May 04 2023 said:
    It would be interesting to see what prices for reserves in the ground that these Acquisitions and Divestitures are bringing? The last sale I had of such reserves of any scale suggested they were paying about 50 cents an MCF - about 25% of the price per MCF.

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News