By David French

HOUSTON, (Reuters) – A new group of U.S. shale producer oil and gas mini-majors has emerged. They were formed from aggressive dealmaking. Industry players believe this will increase on high commodity prices and European withdrawal from U.S. offshore production.

All players are included Devon Energy Corp (NYSE:), EQT Corp (NYSE:), Continental Resources (NYSE:), Pioneer Natural Resources According to interviews with a dozen people, Diamondback (NASDAQ) Energy and (NYSE:) Energy are set for another round.

Jefferies’ global head of power and energy, Pete Bowden stated that the conditions for dealmaking are available to public companies (in particular large, independents, and mid-caps) to transform themselves and create sufficient inventories to take advantage of this supercycle in commodity prices.

Colgate Energy Partners controlled by Pearl Energy Investments & NGP as well as Ameredev II, which is backed by EnCap Investments are potential targets. They were created by private equity investors who combined separate businesses to increase their appeal to emerging mini-majors.

The trend is reminiscent to the end of 1990s, when quick combinations spawned global supermajors BP and NYSE. Exxon Mobil Corp (NYSE 🙂 Chevron Corporation (NYSE:) This round of consolidation, like the previous one, uses scale to increase economies of scale. This time the mini-majors have a lot of bulk in specific U.S. Shale formations.

Pioneer Natural increased its Permian basin holdings last year with two transactions. It now produces more oil there than Exxon. EQT is now the United States’ largest producer thanks to its strength in West Virginia and Pennsylvania Marcellus shale.

Devon was the most performing stock in 2021. This is after Shell (LON), sold assets at the heart of U.S. oil shale.

Devon has at least made two attempts to acquire Exxon’s Bakken shale production in North Dakota. The other was an earlier year. These assets were valued at more than $6B, according to two sources. Devon is betting on North Dakota, Oklahoma, Wyoming, and North Dakota.

Devon and Exxon refused to comment. No one from Pioneer, Diamondback or EQT responded to our requests for comment.

BETTER IS BIGGER

U.S.-based shale firms are taking steps to protect their scale and remain attractive to institutional investors, who tend to only place money in the largest companies. They also want to have access to top quality oilfields, to benefit from surging crude prices. Jefferies’ Bowden stated that.

He stated that “If we look at all the deals made in the past two years, you will see that everyone buyer proved right when securing A-1 properties at prices which seem cheap now, with the benefit to hindsight.”

Because buyers and sellers differ on the valuation of volatile commodities, it is harder to negotiate deals. Still, tie-ups continue.

Whiting Petroleum Corp. (NYSE:) Corp. Oasis Petroleum (NASDAQ) Inc announces a Bakken-focused combo. The following year: PDC Energy (NASDAQ:) Civitas Resources and Inc struck agreements that, if they were all completed, would allow four companies to control the majority of Colorado’s production in Colorado’s Denver-Julesburg region.

ConocoPhillips, a former major which sacked much of its international assets in order to become the largest Permian producer according to volume, is ConocoPhillips. The company spent $23Billion in the 18 month period to purchase properties in Texas by Shell and Concho Resources.

PRIVATE EQUITY’S ROLE

Private equity firms offer fuel to further deals as European majors leave. The 14-year-high oil prices are driving up asset values, and offering opportunities for investors to get out of long-held investments.

“With prices going up, and most of private equity focused on harvesting existing investments in this space, they are more likely to be sellers too, and so the independents will have those opportunities to look at as well,” said Lande Spottswood, partner at law firm Vinson & Elkins.