The U.S. upstream oil and gas sector experienced a significant deceleration in mergers and acquisitions during the second quarter of 2025, marking a notable shift from the record-setting activity observed in 2023. This downturn is primarily attributed to heightened volatility across energy and equity markets, reshaping the strategic landscape for major energy companies and independent producers alike.
- U.S. upstream oil and gas M&A activity saw a significant slowdown in Q2 2025.
- Deal value for Q2 2025 totaled $13.5 billion, representing a 21% quarter-over-quarter reduction.
- The primary drivers for this decline were elevated market volatility, influenced by commodity price fluctuations, trade tariffs, and geopolitical tensions.
- Two major transactions, EOG Resources’ $5.6 billion acquisition and Viper Energy’s $4.1 billion purchase, constituted over 75% of the total Q2 deal value.
- A diminishing pool of attractive domestic targets is prompting companies to explore international M&A opportunities.
Market Slowdown and Declining Deal Value
According to analytics firm Enverus, deal value in the quarter ending June 30, 2025, reached $13.5 billion, reflecting a 21% reduction from the previous quarter. The first half of 2025 saw cumulative transactions totaling $30.5 billion, a substantial 60% decline when compared to the same period in 2024. Andrew Dittmar, a principal analyst at Enverus Intelligence Research, underscored that market instability served as a “major yellow flag” for dealmaking, signaling caution among potential buyers and sellers.
Drivers of Market Volatility
Commodity price instability emerged as a pivotal factor in the M&A slowdown. U.S. crude futures exhibited significant swings in Q2 2025, ranging from a low of $57.13 a barrel on May 5 to a high of $75.14 on June 18, according to data from LSEG. This pronounced volatility was fueled by a confluence of global events. The announcement of extensive trade tariffs by U.S. President Donald Trump in April triggered widespread recession fears and concerns over future fuel demand. Concurrently, the Organization of the Petroleum Exporting Countries’ (OPEC) plans to unwind deep output cuts, coupled with escalating conflict in the Middle East inflating geopolitical risk premiums, further amplified market uncertainty and deterred investment.
Concentration of Major Transactions Amidst Scarcity
Despite the overall deceleration, a few large transactions disproportionately influenced the quarter’s activity. EOG Resources’ $5.6 billion acquisition of Encino Acquisition Partners in May, and Viper Energy’s subsequent $4.1 billion purchase of Sitio Royalties in June, collectively accounted for over 75% of the total second-quarter deal value. This concentration highlights a persistent challenge within the U.S. market: a diminishing pool of attractive domestic targets. Dittmar observed that the “engine of M&A over the last few years has sputtered and stalled, given there are just a few remaining targets,” suggesting that the readily available, high-quality assets have largely been consolidated.
Strategic Pivot Towards International Expansion
Looking ahead, the evolving domestic landscape strongly suggests a strategic pivot for energy companies. With fewer compelling opportunities remaining within U.S. borders, producers are increasingly expected to explore opportunities further afield. Potential targets have been identified in neighboring regions such as Canada, or even more distant territories like Argentina’s Vaca Muerta shale play. This shift signals a broader geographic scope for future energy mergers and acquisitions, as companies seek new avenues for growth and resource acquisition beyond traditional domestic plays.
Michael Carter holds a BA in Economics from the University of Chicago and is a CFA charterholder. With over a decade of experience at top financial publications, he specializes in equity markets, mergers & acquisitions, and macroeconomic trends, delivering clear, data-driven insights that help readers navigate complex market movements.