The U.S. shale patch is on the verge of a new boom in mergers and acquisitions, in which companies that have expanded with recent deals are expected to continue growing via acquisitions of scale to build acreage and take advantage of the high oil prices, Reuters reported on Tuesday, citing interviews with a dozen sources in the industry.
Industry analysts and sources expect companies like Continental Resources, Pioneer Natural Resources, Diamondback Energy, Devon Energy, and EQT Corporation to continue making deals, emerging as the “mini-majors” of the U.S. shale patch, after European supermajors such as Shell divested their shale assets.
Devon Energy, for example, has approached ExxonMobil twice with offers to buy the supermajor’s assets in the Bakken, two sources told Reuters on the condition of anonymity. One of Devon’s offers was earlier this year and valued Exxon’s acreage at over $6 billion, according to Reuters’ sources.
Last week, reports emerged that confusion over asset valuation as oil prices are on their wildest ride in history over Russia’s invasion of Ukraine had put some deals in the U.S. shale patch on hold. Some companies in the shale patch had been marketing acreage in the Permian and Eagle Ford basins, but sale processes were paused amid the oil price rally of the past weeks, according to sources who have spoken to Bloomberg.
Not all potential deals are being paused. Earlier this month, Whiting Petroleum Corporation and Oasis Petroleum said they had entered into an agreement to combine in a merger of equals transaction, which will result in a company with an enterprise value of around $6 billion.
Upstream M&A deal flow could hit the highest in years in 2022 if commodity prices hold steady, Wood Mackenzie analysts said in their 2022 outlook of the global upstream published in January.
“Companies’ ability to finance and execute acquisitions improved immeasurably through the course of 2021 – we can see this clearly in the increasing number of larger cash asset deals. If commodity prices remain elevated, the ability to execute transactions will only increase through 2022,” the authors of the outlook said.