M&A Q1 Deals: U.S. Consolidation Continues To Dominate Upstream M&A
U.S. producers seeking greater scale in core operating areas drove global upstream M&A to $56 billion in Q1.
Evaluate Energy data shows this is a 41 per cent increase over the global quarterly average spend for the past five years.
It was the second consecutive quarter where U.S. assets accounted for 90 per cent of deal value.
Six corporate mergers each valued at over $1 billion saw the acquirer add significant production in existing key operational areas, headlined by Diamondback Energy’s $26 billion deal in the Permian Basin to acquire Endeavor Energy.
All six deals see the acquirer’s production base grow by at least 25 per cent, with Chesapeake Energy Corporation set to more than double in size by merging with Southwestern Energy, pending approvals.
The acquisitions by APA and Talos Energy completed by quarter end. At the time of writing, the remaining four deals listed above remain in play, along with the following deals in the U.S. and around the world:
Corporate mergers usually see acquirers seek to trim and streamline as they integrate new assets. The completion of these deals could be a key driver of M&A activity in the second half of 2024.
Some existing or acquired assets will be deemed “non-core” and sold based on several factors, including debt reduction, a less-than-ideal location, oil weighting, operating costs, or emissions profile.
Diamondback is a good example. It spent the last year integrating assets acquired for $3.1 billion via corporate mergers in early 2023. Since those deals completed, the company has made:
- Upstream sales in Texas for a combined $348 million;
- A drop-down royalty sale to subsidiary Viper Energy for further $75 million;
- Midstream sector sales totaling almost $900 million.