Energy Analytics Financial Services

How to stay on top in a hot M&A market – Tips for small & mid-sized operators


Texas summers aren’t the only thing breaking heat records right now – the M&A market saw some big deals in 2Q23. According to the Enverus Intelligence Upstream M&A Review, more than $24 billion transacted from about 20 deals for an average deal size of over $1 billion through the quarter. This peak was driven by a few strategic deals with significant production value, as investors are continuing to ascribe value to duration of inventory.

The M&A market is bracing for change, bringing challenges for small and mid-sized operators including:

  1. Prioritizing the right deals to negotiate
  2. Lean teams needing management and board alignment
  3. Technical due diligence across several smaller deals 

In this post, we’ll drill into these challenges in more detail with tips on how to navigate and stay ahead in the active M&A environment.

Change is coming to the M&A market

This marks a shift from the land-centric shale deals we’ve been seeing in the market as companies were prioritizing blocking up acreage. Enverus analysts suggest that a round of public company consolidation could be coming, driven by increasing costs of Tier 1 private Permian assets, while there is a distinct lack of remaining private opportunities.

In the most recent edition of Weekly Market Pulse, Enverus analysts remark that the list of available targets is significantly shorter than it once was. There has been more than $60 billion in private equity sales since the beginning of 2021. The next logical step would be for the market to turn to public company mergers, which makes strategic sense from a scale and G&A savings perspective, while also possibly providing more favorable valuations than private markets.

Caption: Recent transactions across the Permian Basin with metrics such as $/acre, $/location and more, to evaluate trends and benchmark deals, using M&A Analytics in PRISM.

Challenge 1: Prioritizing the right deals to negotiate

We hear from our clients over and over that one of the biggest challenges to staying competitive in the M&A market is figuring out which opportunities to say “no” to faster.

Continuously keeping tabs on market activity, whether within a single basin or comparing activity across plays through time is important to benchmark upcoming deals. Similarly, understanding who is driving the deals can impact your strategy in finding and evaluating opportunities for your portfolio. For example, Enverus analysts using M&A Analytics found that public buyers accounted for 85% of acquisitions in 2Q23. Most of those dollars came from buying private companies. Additionally, we see remaining inventory driving deals and can track the average dollar paid per location in each deal.

Solution: High grade the best deals with access to industry’s only source of public and private deals for sale alongside analytics-ready, consistent energy data sets.

*Enverus M&A Analytics & Foundations

Challenge 2: Lean teams need to move fast and be aligned

Smaller operating companies often have lean teams with each person wearing multiple hats. This smaller team structure can be an advantage for moving quickly, but only if each person isn’t bogged down by managing multiple analytics platforms and data sources, and instead is able to jump between geological, engineering and land datasets to quickly evaluate the next deal and easily share their interpretations with management.

Benchmarking opportunities based on better rock quality or whether the deal falls into a Tier 1 acreage position, for example, can provide better insights into the market trends. Enverus Analysts can assess who the players are that will be expecting a higher multiple or where to expect a higher rate of consolidation by leveraging geological and engineering data alongside deals and current production, all within PRISM.

Solution: Assess deals faster, in a single platform, and share analysis easily. Lean on the Intelligence Team of analysts as an extension of your team.

*Enverus PRISM® and Fusion Connect

Challenge 3: Don’t trade on technical due diligence to evaluate several smaller deals

PDP and inventory are driving deals in the market, so being able to get to the production forecasts and remaining locations faster is imperative. When compiling several smaller deals rather than spending more time on one big evaluation, having detailed technical analysis at your fingertips is the only way to succeed.

One takeaway the team noticed in the last quarter of deals was that private companies have largely ramped up production before marketing assets, as cost inflation moves breakevens up and opportunities dwindle. To be able to see what buyers in recent deals may be underwriting in less proven benches, having access to data rooms, working in outdated platforms and using acreage math won’t cut it. Find out why we think so in this blog.

Solution: Need to evaluate the deals quickly, but can’t forgo on technical details.

*Enverus Spacing and Forecasting Solutions

Want to dive deeper into how you can stay on top in a competitive M&A market? Learn more about Enverus solutions, designed specifically to solve these challenges, and more. Fill out the form below to access the videos.

Set up a meeting with one of our Business Development experts to learn more about Enverus solutions for operators who are looking to evaluate, acquire and divest assets.



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