The first quarter of 2025 has seen a remarkable surge in oil and gas mergers and acquisitions (M&A) within the upstream oil and gas sector, with transactions totaling $17 billion. This dynamic environment presents both challenges and opportunities for small to mid-sized operators. Read below to understand these trends and strategically position yourself to capitalize on this evolving market. The M&A market was a hot topic at this year’s EVOLVE Conference, where we heard from industry experts discussing “The Next Act for Energy M&A.”
Themes covered:
- Current M&A activity
- Challenges for small and mid-sized operators
- Where are the opportunities?
Current M&A Activity
The upstream M&A market kicked off 2025 with a strong showing, reaching $17 billion in total deal value—marking the second-best first quarter since 2018. However, this surge was largely driven by a single player: Diamondback Energy. Its acquisition of Double Eagle IV and a related minerals dropdown to Viper Energy Partners accounted for nearly half of the quarter’s total deal value.
This concentration underscores a broader trend. While headline numbers are impressive, the market is becoming increasingly turbulent. Large public E&Ps are consolidating premium inventory in core regions like the Permian, where high-quality assets are scarce and valuations are steep. As a result, smaller operators face growing challenges in accessing top-tier acreage.
That said, opportunities still exist. Conventional plays remain active, with 57 deals totaling $6.25 billion, offering potential entry points for smaller players. Additionally, as buyers grow more selective and sellers hold firm on pricing, creative strategies—such as targeting less consolidated basins or leveraging undeveloped inventory—are becoming essential for navigating this evolving landscape.
Challenges for Small & Mid-Sized Operators
- Valuation Challenges
Accurate valuation of remaining opportunities is crucial for small operators. Aligning valuations with current market trends and investor expectations is essential to secure favorable deals. Smaller deals are still occurring, particularly in conventional plays and areas outside major basins. However, the complexity of accurately valuing these opportunities can pose a significant challenge and lead to missed opportunities or submitting the wrong bid in this competitive environment. - Difficulty Monetizing Undeveloped Reserves
Another challenge lies in monetizing undeveloped reserves. As the market increasingly values these assets—sometimes approaching PV10 valuations—smaller operators may lack the tools or data to effectively demonstrate the potential of their inventory to buyers or investors.
This can result in undervaluation during negotiations or difficulty attracting capital, as buyers may be unwilling to pay a premium without clear, data-backed projections. In some cases, promising assets may remain unsold or be sold at a discount, limiting reinvestment potential.
There is also another factor influencing the monetization of undeveloped reserves that deserves consideration. The scarcity of tier-one inventory is also fueling a sense of urgency among buyers. This “FOMO” effect can lead to impulsive decisions and inflated valuations. For smaller operators, the antidote is discipline: conducting rigorous technical diligence, aligning internal expectations and setting clear investment criteria to avoid chasing hype.
- Decline in PE-Backed Funding
Access to capital is also tightening. Private equity funding for E&P ventures has dropped sharply, especially outside the Permian. This trend constrains smaller operators’ ability to scale or prepare assets for sale. This decline is driven by a combination of factors, including investor fatigue from underperforming past funds and consolidation trends that reduce the number of attractive standalone targets. As a result, smaller operators are finding it harder to secure the funding needed to scale operations or prepare assets for sale.
Opportunities for Small & Mid-Sized Operators
- Use of Advanced Screening Tools
Leveraging advanced analytics platforms can help smaller operators identify undervalued assets, model undeveloped inventory, and benchmark against peers—enhancing their strategic positioning in the M&A landscape.
We recently had a webinar on this very topic! Check out the clip below to get a taste of how you can calculate average NPV per well for undeveloped inventory.
- Operational Efficiency as a Differentiator
Operational efficiency is a key differentiator. Companies that demonstrate disciplined capital deployment and strong production metrics—like Double Eagle—can position themselves as attractive acquisition targets or joint venture partners.
In fact, as panelists at our recent EVOLVE Conference touch on, capital is flowing only to projects with clear, contract-backed demand. Whether in traditional or emerging energy segments, what matters most is a clear path to near-term cash flow. Projects with committed customers are far more likely to secure funding and succeed post-acquisition.
- Creative Asset Screening
Given the limited prime opportunities, small operators need to expand their asset screening scope. This may involve considering lower-tier unconventional assets or integrating energy transition technologies. By broadening their search criteria, operators can uncover hidden gems that larger companies might overlook.
- Alternative Opportunities
While most core assets may be out of reach for companies with smaller budgets, there are alternative opportunities to capitalize on. Conventional plays remain active, suggesting potential for smaller operators to thrive in these areas. By strategically targeting these less competitive deals, operators can navigate the M&A landscape to find profitable opportunities.
Additionally, niche markets such as water handling and disposal assets, energy transition technologies, and seismic and data assets for AI applications offer promising avenues.
- Market Positioning and Regional Dynamics
Recent M&A activity has spanned a wide range of deal sizes—from $100 million to more than $1 billion—across multiple regions, highlighting the importance of geographic diversification. While core basins like the Permian remain highly competitive and increasingly consolidated, smaller operators can find strategic advantages by targeting less saturated regions such as the Uinta or Haynesville. These basins are gaining renewed interest due to rising gas prices and the growing impact of LNG exports, offering a more level playing field for non-majors.
By positioning themselves in these emerging areas and considering lower-tier unconventional assets, small operators can tap into overlooked opportunities. Integrating energy transition technologies and expanding asset screening criteria further enhance their ability to uncover value in a market where traditional core inventory is increasingly out of reach.
Conclusion
The M&A landscape in 2025 presents both challenges and opportunities for small to medium-sized upstream operators. While large companies continue to dominate core inventory, there are alternative opportunities in conventional plays and niche markets. Even in emerging sectors like CCUS and geothermal, investors are applying the same rigor they use in traditional oil and gas. Projects that resemble familiar subsurface models and offer contractual visibility are gaining traction—while those based on unproven demand or policy incentives alone are facing headwinds. By strategically positioning themselves, expanding their asset screening scope and leveraging emerging technologies, small operators can navigate the evolving market and capitalize on the dynamic M&A activity.
