The U.S. upstream oil and gas merger and acquisition (M&A) market faces a notable slowdown in 2025, as falling oil prices and a shrinking supply of prime shale acreage constrict dealmaking opportunities. While the first quarter saw a surge in activity with nearly $17 billion in deals—largely driven by Diamondback Energy—industry analysts warn that such momentum is unlikely to be sustained.
Diamondback Energy accounted for nearly half of the first quarter’s M&A value through major transactions, including a $4.08 billion acquisition of Double Eagle IV in the Midland basin and a $4.26 billion mineral sale to Viper Energy. Despite these headline-grabbing deals, market participants are encountering heightened challenges such as limited available inventory of undeveloped drilling sites and rising asset price expectations from sellers. This scarcity has fueled a stalemate where sellers’ unwillingness to discount assets clashes with buyers’ diminished willingness to pay at previously high M&A valuations, especially under the pressure of lower oil prices.
The backdrop to this tension includes a slump in crude oil prices, with benchmarks like West Texas Intermediate hitting multi-year lows due to trade tensions, economic growth concerns, and output policy shifts from OPEC+ countries, which are planning to ease production cuts. These factors have diminished revenue prospects, making it harder for buyers to justify elevated prices despite the shortage of quality shale properties. Additional activity in natural gas, particularly in Louisiana’s Haynesville shale, reflects some optimism tied to expanding liquefied natural gas exports, but this area remains separate from the broader upstream oil M&A contractions.
The anticipated slowdown marks the toughest environment for upstream oil and gas deals since the early months of the COVID-19 pandemic, reversing the record-breaking wave of consolidation seen in 2023 when M&A deals totaled $192 billion. As sellers hold firm on asset values and buyers retrench amid weaker market conditions, the mismatched expectations could substantially dampen deal volumes for the foreseeable future.
This evolving landscape underscores the sensitivity of the energy sector’s M&A activity to commodity price fluctuations and resource availability, highlighting the challenging road ahead for investors and companies seeking growth through acquisitions in the current market.