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After two years of booming activity, the merger and acquisition space in the U.S. has slowed down significantly. Buyer are turning their attention from quantity to quality and focusing on extracting as much value from deals they made previously. Also, they’re running out of targets.

After two booming years, it was really only a matter of time before this happened. The megadeals of 2023 and 2024 were the highlight of that period, which followed the 2022 profit windfall the industry enjoyed amid the war escalation in Ukraine. Yet megadeals are, by definition, a very limited number. Most deals in 2023 and 2024 were smaller ones, with the trend essentially being vertically integrated majors swallowing smaller independents to boost their footprint in the shale patch faster and easier as reports of a shrinking pool of untapped resources began to come in.

Then came the oil price slump this year as President Trump took office and started imposing tariffs on U.S. trade partners to punish them for what he and his administration saw as years of taking advantage of the world’s largest economy. The tariff offensive sparked worry across industries, and oil and gas were no exception. Indeed, oil and gas companies that had been extra generous in the last two years suddenly had to become frugal.

“We're in a period right now where there's so much noise and volatility that not a lot gets done,” Reuters quoted the CEO of Diamondback Energy as saying recently. “Anything that we would look at would have to be extremely cheap, and I just don't think we're there yet today.”

All this is happening after a rather strong start to the year. As Enverus reported last month, the first quarter of 2025 was pretty solid in oil and gas mergers and acquisitions. However, the firm’s analysts noted that this was about to change as high-quality targets ran out, and sellers were well aware of that and, as a result, unwilling to sell at a discount. Buyers, on the other hand, were running out of money for premium deals.

“Upstream deal markets are heading into the most challenging conditions we have seen since the first half of 2020. High asset prices and limited opportunities are colliding with weakening crude,” Enverus principal analyst Andrew Dittmar summed it up at the time. Now, he has predicted that the industry may see a pickup in M&A activity towards the end of the year if the tariff offensive ends with deals and what pretty much everyone sees as a looming recession risk abates. Of course, it wouldn’t hurt if prices rebounded a bit more strongly.

These things are bound to happen sooner or later as drillers reduce activity, too. With WTI at around $60 per barrel, production is about to go from growth to plateau, as ConocoPhillips CEO Ryan Lance said this week. Should the U.S. benchmark fall in the $50s, production will start declining—bar yet another technological breakthrough that would make oil economical at those price levels.

The circumstances right now, in other words, do not support a strong M&A appetite. This will come back as prices rise following the supply squeeze from lower drilling and worry about demand prospects subsides. Both of these will happen, sooner or later, as they have happened before, during pretty much every cycle in the energy industry. Until then, oil majors will be focusing on extracting the best possible value from the deals they made during the boom years, or, as Exxon’s chief executive put it recently, “One plus one has to equal three.”

By Irina Slav for Oilprice.com