A new wave of consolidation is on the horizon for small- and medium-sized US shale producers, largely driven by an appetite for scale in a merger and acquisition (M&A) environment that is getting increasingly competitive Rystad Energy reports. Scale and efficiency are key catalysts for exploration and production (E&P) players who are seeking favourable business valuations, with acquisitions emerging as a key calculation of shareholder value by rewarding operators who keep volumes high and costs low.
To build scale and survive another consolidation wave, the smaller E&Ps have limited choices: either buy assets that larger players are looking to get rid of, or acquire privately owned E&Ps. Neither of these options are expected to provide the scale the players are looking for. Given the need to move higher within their segment or elevate to a top-tier profile for favourable valuations, Rystad Energy believes that smaller operators will now pursue combinations within their peer group, implying a new wave of a merger of equals.
“This is likely a shift in strategy due to the scarcity of opportunities and an ever-evolving menu of acquisition options. Although smaller E&Ps are the most likely to be snapped up, they are also on a mission to punch above their weight by acquiring what’s left of the M&A waves experienced over the last two years, which could include non-core assets that ExxonMobil, Diamondback, Occidental, and ConocoPhillips are looking to shed. Most assets on the market range between US$500 million and US$1 billion and lack both quality inventory and significant production value, making investments unlikely to increase scale for buyers looking to grow inorganically. Neither this option nor private acquisitions would be able to truly move the needle for smaller buyers,” said Atul Raina, vice president, oil and gas M&A, Rystad Energy.
Rystad Energy analysis shows that companies such as Permian Resources could emerge both as an acquirer or a potential target in this new wave. Companies like Matador, HighPeak and Chord also stand out as credible next movers. Other potential candidates that could emerge as consolidators or remain active in upstream M&A – driven by strategic portfolio positioning and valuation dynamics – include Coterra Energy, Ovintiv and Devon Energy. Coterra continues to emphasise its multi-basin strategy across the Permian, Marcellus and Anadarko regions. Ovintiv has followed a similar approach. Given their comparable size, gas-weighting and inventory depth, a merger of near-equals between Coterra and Ovintiv could present strategic merits while some key challenges remain. Two paths emerge for these players – either grow inorganically by acquiring what the larger companies are selling or scoop up an operator of equal or lesser value.
Recent deals by Crescent and SM reflect the pursuit of scale despite a lack of significant operational overlap. This is unlike the first wave of consolidation, where buyers were focused on increasing scale in core operating areas. These E&Ps missed out on the first wave and now have found themselves merging in deals for far lower multiples than were achieved in the last two years. Given these diverse operations, realising G&A synergies and utilising the scale to improve cost of capital becomes critical to derive long-term value from the mergers. It remains to be seen whether the market values absolute scale and scale with tangible operational synergies differently.
Read the latest issue of Oilfield Technology magazine for upstream news, project stories, industry insight and technical articles.
Oilfield Technology’s November/December 2025 issue
The November/December 2025 issue of Oilfield Technology focuses on how the upstream sector is modernising to stay efficient, competitive, and lower-carbon. It explores decarbonising drilling operations, improving performance through advanced monitoring and drilling technologies, reshoring and strengthening supply chains, enhancing offshore inspections, and tightening cybersecurity. Together, the articles highlight a sector pushing towards greater efficiency, resilience, and sustainability across the full lifecycle of oilfield operations.