US oil and gas deals drop to $12bn in second quarter because of price volatility

M&A activity in the sector in April-June period was nearly a third of the $34.8bn recorded in the same period in 2021

A flare burns excess natural gas in the Permian Basin in Loving County, Texas, US. The Permian Basin of west Texas and New Mexico accounted for 46 per cent of last quarter's deal value, making it the Show more

US oil and gas deal-making fell to $12 billion last quarter, down from the first quarter and nearly a third of the $34.8bn in the same period a year ago, as commodity price volatility left buyers and sellers clashing over asset values, according to data released by energy analytics firm Enverus on Thursday.

"The spike in commodity prices that followed Russia’s invasion of Ukraine temporarily stalled M&A [merger and acquisition] as buyers and sellers disagreed on the value of assets," said Andrew Dittmar, a director at Enverus Intelligence Research.

US benchmark crude oil futures prices surged to more than $123 a barrel in early March following Russia's invasion of Ukraine, but prices have since cooled as recession worries moved to the forefront.

But last quarter's high prices prompted M&A interest from private equity firms and spurred some deals, Mr Dittmar said. Private equity sellers made up about 80 per cent of the quarter's total deal value, Enverus data showed.

This year's oil prices have led to a rush among private investors to put properties across the US shale patch on the market, Mr Dittmar said.

"The challenge is finding buyers willing to pay their asking prices," he said.

The Permian Basin of west Texas and New Mexico accounted for 46 per cent of last quarter's deal value, making it the most active oil and gas region in the US.

The Rockies followed with 12 per cent, Midcontinent with 6 per cent, US Gulf Coast with 5 per cent and the West Coast with 2 per cent, according to Enverus data.

The offshore Gulf of Mexico, eastern US and Alaska did not register deals.

About a third of the total deal value came from a merger between private Colgate Energy Partners III and Centennial Resource Development.

Other top deals by price last quarter included a $1.3bn agreement between Grey Rock Investment Partners and Executive Network Partnering to form Granite Ridge Resources.