By Mark Jaffe, EUCI energy writer
Upstream oil and gas mergers and acquisitions opened 2025 with $17 billion in deals, the second-best start since 2018, but it was largely powered by one company. Prospects for the rest of the year are uncertain, according to Enverus Intelligence Research.
Diamondback Energy dominated the quarter with its $4.08 billion acquisition of Double Eagle IV in the Permian Basin and a $4.3 billion transfer to its affiliate Viper Energy, a so-called drop down in preparation for a sale of assets.
The next largest acquisition was Diversified Energy’s $1.27 billion purchase of Maverick Natural Resources’ Permian assets. It is Diversified Energy’s first foray into the Permian Basin, the most productive oil and gas play in the U.S.
“Permian land has been prioritized for acquisitions by companies because the high-quality inventory there can generate strong returns through the commodity price cycle,” Andrew Dittmar, principal Enverus analyst, said in a statement.
For the rest of 2025, however, buyers are facing limited acquisition opportunities, high prices and the economic pressures of falling oil and stock prices.
“Upstream deal markets are heading into the most challenging conditions we have seen since the first half of 2020,” Dittmar said. “High asset prices and limited opportunities are colliding with weakening crude.”
Morningstar DBRS, the credit rating agency, for example, cut its 2025 projection for the West Texas Intermediate crude oil price to $60 a barrel from $65 a barrel to “reflect a diminished full-year global crude oil supply-demand balance.”
“The double whammy of a tariff-induced global economic slowdown and gradually increasing OPEC+ supply will continue to pressure the oil price in the near term,” Morningstar said.
Lower crude prices have repeatedly dampered M&A activity, Enverus said, noting that since 2014, oil prices have fallen by more than 5% quarter-over-quarter 17 times, and in 11of those deal activity fell compared to the prior three months with an average decline in transacted deal value of 30%.
“With oil prices dropping, whatever buyers are in the market are likely to redouble efforts to pick up high-quality locations held by private companies like FireBird Energy II and TRP Energy in the Permian and will be less interested in private opportunities in plays like the Eagle Ford and Bakken that had been gaining momentum as a cheaper alternative but have less economic inventory,” Dittmar said.
Natural gas is one potential “bright spot,” Enverus said, as both domestic and international buyers see future strong growth in demand between liquefied natural gas exports and domestic demand for fuel to power data centers.
The result is a high demand for Haynesville natural gas assets compared to the available opportunities. This could lead to more buyers looking at other areas, such as the Eagle Ford natural gas window or the Mid-Continent.
One big difference between this downturn and past drops is that publicly traded exploration and production (E&P) companies “are relatively well positioned to withstand lower prices, at least for this year,” Enverus said.
Companies have curbed debt levels, been conservative about expanding production and have employed hedges. This, Enverus said, should put these companies in a position to maintain operations through the rest of the year.
“Although we view the current economic headwinds facing oil and gas producers as a credit negative, most of our rated issuers are financially and operationally well positioned to weather a middling downturn,” Andrew O’Conor, Morningstar senior vice president of energy, utilities and natural resources, said in a note.
If economic and oil price weaknesses continue, it could spell problems. “If oil prices struggle into 2026, public E&Ps are likely to start taking more drastic actions including cutting capital spending, selling assets or even considering mergers with another company,” said Dittmar.
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