Volatility Spooks Investors, Dealmaking Slows in Upstream American Oil and Gas

Mergers and acquisitions in the American upstream oil and gas sector slowed in Q2 as volatility across the equity and energy markets continues to rattle investors. The downturn in M&A activity follows a string of high-profile buyouts by major oil and gas companies in recent years, wrapping up with $192 billion in deals completed in 2023. 

Enverus Intelligence Research reports that the quarter ending June 30 recorded transactions totaling $13.5 billion, signifying a 21% decline quarter-on-quarter. Altogether, the first six months of this year saw $30.5 billion change ownership, marking a steep 60% plunge from the same period in 2024. 

EOG Resources, an exploration and production firm based in Houston, acquired oil and gas company Encino Acquisition Partners from Encino Energy and CPP Investments in May for $5.6 billion. The firm’s CEO, Ezra Y. Yacob, stated that this acquisition combined premier acreage positions in the Utica and would help create a foundational play for the firm alongside its Eagle Ford and Delaware Basin assets. 

The following month, Viper Energy bought Sitio Royalties for $4.1 billion. With this transaction, this subsidiary of Diamondback Energy Inc. positions itself to compete for capital with mid and large cap North American E&Ps. 

According to Enverus, these two transactions made up over 75% of deals closed in Q2. The firm’s principal analyst, Andrew Dittmar, explains how volatility may have dampened deal activity in the sector. 

Earlier in April, President Donald Trump rolled out ‘reciprocal’ trade tariffs which imposed a 10% baseline tax on imports from all countries. Oil prices sank to multi-year lows after the announcement, sparking recession fears and concerns over shrinking fuel consumption. 

Soon after this, OPEC announced its plans to scale back major production cuts, which helped prices rebound as renewed tensions in the Middle East continued to drive up traders’ risk premium. 

Data from LSEG shows that at the start of May, U.S. crude futures in Q2 hit $57.13 a barrel then shot up to $75.14 a barrel mid-June.  

Dittmar notes that the wave of mergers and acquisitions that propelled the sector in recent years has lost momentum, since so few viable targets are left. He adds that firms may eventually be compelled to look abroad for asset acquisitions, be it in Canada or in areas like the Vaca Muerta in Argentina. The Vaca Muerta is the second largest shale gas resource globally as well as the fourth-largest shale oil resource in the world. 

Concerns about volatility could also be impacting exploration activities around the world, and entities like GEMXX Corp. (OTC: GEMZ) conducting their exploration operations in Latin America could be experiencing their own share of headaches over the shifting trade policies of the U.S. 

NOTE TO INVESTORS: The latest news and updates relating to GEMXX Corp. (OTC: GEMZ) are available in the company’s newsroom at https://ibn.fm/GEMZ 

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