Drillers are ramping up consolidation as the new administration changes US policy toward fossil fuels.
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Welcome to our guide to the commodities powering the economy. Today, reporter David Wethe examines how the shale industry is responding to the Trump administration’s enthusiasm for fossil fuels.
Appetite for deals in the US shale patch is ramping up during President Donald Trump’s first month in office as producers try to lock down the last remaining high-quality acreage.
Diamondback Energy Inc. agreed Tuesday to acquire assets in the Permian Basin from closely held Double Eagle for $4.1 billion, viewing this as one of the final pieces for a long-lasting inventory of drilling spots.
That same day, Occidental Petroleum Corp. announced $1.2 billion in asset sales across the Permian and US Rockies region. Those are meant to bring down debt after its own portfolio-improving acquisition of CrownRock LP closed in August.
“The Permian Basin continues to consolidate rapidly,” Travis Stice, Diamondback’s chief executive officer, said in a statement announcing the acquisition. “Double Eagle is the most attractive asset remaining in the Midland Basin.”
Deal-making decelerated in the latter half of 2024 as approvals from the US Federal Trade Commission slowed in the waning days of the Biden administration. Trump replaced the head of the FTC, renewing the shale industry’s enthusiasm for mergers and acquisitions.
Source: Diamondback Energy, BloombergNEF
Note: A lateral is the horizontal leg of a well bore.
To be clear, with some of the best drilling locations already developed, the appetite is now for deals that extend inventory rather than ramp up production — a potential challenge to Trump’s aggressive “drill, baby, drill” agenda for fossil fuels.
Most independent shale companies are limiting growth to within 5%.
Industry consultant Enverus warned that this year will see a slowdown in M&A. Even so, Bloomberg Intelligence reminds us not to sleep on the smaller exploration and production firms still pruning their portfolios.
“Private operators remain the primary drivers of a significant amount of the basin’s production, along with a large portion of rigs and completion crews,” senior industry analyst Vincent Piazza wrote in a Feb. 18 research note.
“With WTI crude above $70 a barrel and natural gas supported, we expect additional consolidation of smaller Permian E&Ps.”
–David Wethe, Bloomberg News
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