Upstream merger and acquisition activity opened 2025 with its second-best start to a year since 2018, according to Enverus Intelligence Research’s quarterly M&A report. Upstream M&A deals were valued at $17 billion in the first quarter. EIR analysts noted that that activity was disproportionately driven by Midland’s own Diamondback Energy, which accounted for nearly 50% of total value between its acquisition of Double Eagle IV and a dropdown of minerals to its affiliate Viper Energy Partners. Outside of Diamondback, buyers were already feeling the pressure of limited acquisition opportunities and high asking prices for undeveloped drilling inventory, the report found. On top of that, upstream companies will now have to navigate significant headwinds from falling oil and equity values, EIR analysts added. “Upstream deal markets are heading into the most challenging conditions we have seen since the first half of 2020. High asset prices and limited opportunities are colliding with weakening crude,” said Andrew Dittmar, principal analyst at EIR. “Potential sellers are acutely aware of the scarcity of high-quality shale inventory, creating a reluctance to unload their assets at a discount. Buyers, on the other hand, were already stretched by M&A valuations and can’t afford to continue to pay recent prices now that oil prices are lower. The standoff between those two groups around fair asset pricing is set to sink M&A activity.” Dittmar told the Reporter-Telegram that he doesn’t think declining M&A activity ‘in and of itself will have an impact on production or activity. The past consolidation we have seen in the Permian likely does mute the production response to pricing since less assets are in the hands of smaller private operators.’ Private companies, especially smaller ones, are likely to be the most sensitive to moves in oil prices in terms of dropping rigs when prices fall or adding them back when prices rise, Dittmar said. Public companies with disclosed capital spending plans and that are already guiding to flat or very slowly growing production are less likely to reduce activity in the near-term, although if prices stay low, they will probably plan to slow drilling in 2026 as hedges roll off, he continued. EIR doesn’t expect significant non-core sales of shale inventory in the Permian from the big buyers of the last few years, he said. ‘Maintaining inventory life in the Permian is too important to their long-term plans and even acreage that doesn’t look as promising today could be valuable down the road,’ he explained. ‘Most public companies are also in fairly good shape to weather the price downturn with lower debt levels than in previous low-price cycles and muted spending. They particularly don’t want to sell assets in a low commodity price environment if they don’t have to.’ The types of non-core asset sales EIR has seen tend to be older legacy positions in areas like the Central Basin Platform and Northwest Shelf that have higher cost production and more of those assets could hit the market as they are less economic in a lower price environment. ‘The Permian leads all other U.S. plays for remaining high-quality inventory so there are still tier one locations left to drill. Still, we are seeing a greater focus on secondary intervals in the Permian that are becoming a larger focus for operators as primary zones are developed and resource expansion continues. What comes next after the Permian is more Permian as operators continue to find productive intervals,’ Dittmar said.

Report says upstream deals face significant headwinds

Enverus Intelligence Research's quarterly M&A report indicates that upstream merger and acquisition activity in the Permian Basin opened 2025 with its second-best start since 2018, driven mainly by Diamondback Energy's acquisitions. However, the report warns that falling oil and equity values, coupled with high asset prices and limited acquisition opportunities, are expected to significantly reduce M&A activity in the coming months.