U.S. shale oil groups, buoyed by high oil and gas prices last year, are looking for new business deals, the Financial Times reports — last year they amassed $150 billion and this year they expect $120 billion. billion dollars. cash flow. And this is because their fears are growing that the best drilling sites are becoming less and less. Bank executives and lawyers have reported a sharp spike in activity in recent weeks as buyers and sellers across the industry mobilize teams to close a slew of deals after a long lull. This movement is especially noticeable in the vast Permian Basin of Texas and New Mexico, where the most productive oil field in the world is located. “There will be a number of mergers and acquisitions in 2023,” said Pete Bowden, director of global energy banking at Jefferies and one of the most popular traders in the industry. “They are interested and willing to make purchases to increase their inventory,” he added. The expected boom in M&A is the latest sign of the excellent health of the US oil and gas industry, which has profited record highs from high energy prices caused by Russia’s invasion of Ukraine.

Companies in the sector have accumulated a lot of liquidity after rising oil and natural gas prices.

U.S. shale producers recorded record cash flows of more than $150 billion in 2023, a significant number in the industry, according to business consulting firm Rystad Energy, and are expected to raise another $120 billion in 2023. Oil groups have paid off tens of billions of dollars of debt over the past year and have enough firepower to close deals, according to bank executives quoted by the Financial Times. The reason for the expected boom in deals is the concern of many industry groups that good acreage is running out as revenue from new oil wells wanes after a decade of production frenzy. However, the sector remains largely fragmented, with dozens of operating companies ranging from small single-rig companies to giants. However, these companies are looking to acquire competing companies to take advantage of the best remaining drilling prospects.

“If you can buy assets at a reasonable price and you have the balance and cash to do so, you will do so at these prices,” said Mohamed Lagari, senior managing director of investment banking at Guggenheim Partners. The expected increase in buying interest this year comes on the heels of just 160 acquisitions and mergers in 2022, according to consultancy Enverus, the lowest since 2005. Finally, their combined value last year was $58 billion, 13% lower than the previous year. a year and 1/5 less than before the pandemic. Finally, late last year there were several deals, such as Diamondback and Marathon Oil, which each paid $3 billion to acquire land in the Permian and Eagle Ford basins.