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Howdy welcomes to the energy source that comes to you from the heart of the oil and gas country in Houston, Texas.
I am Christina Shevory, a native Texan and new energy correspondent for FT, who writes my first Energy Source newsletter.
Before we reach that, my FT colleague Malcolm Moore talks about how investment in fossil fuels will fall for the first time since the Covid pandemic, according to the International Energy Agency.
A sharp drop in oil prices has forced businesses to reevaluate their plans, which is expected to lead to the biggest drop in investments since 2016, when oil prices fell below $30 a barrel.
“This is the first time we’ve seen such a decline, except for Covid, due to lower prices and lower oil demand,” said Fatih Birol, head of the Paris-based intergovernmental energy advisory body.
Thank you for reading, Christina.
M&A Activities stall with US oil patches
Here in Houston, trading is pretty quiet. What’s happening now with oil patches is what’s called a Mexican standoff in Texas. Everyone is pointing their guns at each other, so no one wants to draw them first. Or, from an oil and gas market perspective, sellers are worried about sales being too low, and buyers are worried about overpayment.
“We’re committed to providing a range of growth capital,” said Patti Melcher, founder and managing partner at Eiv Capital, a private equity company that supplies growth capital.
The decline in crude oil prices has reduced the ability of buyers to pay a heavy valuation as it has fallen 14% since the beginning of the year amid rising tariffs and OPEC+ supply. Sellers who know that they lack great assets are also reluctant to offload these properties at discounted prices.
According to a study by Enverus Intelligence, the value of upstream US M&A reached $17 billion in the first quarter of 2025, the second-strongest start since 2018. However, almost half of that amount came from two deals by Diamondback Energy. Dive a little deeper, trading is being hampered by a high of $144 billion in the fourth quarter of 2023.
“The upstream trading market is heading towards the most challenging conditions we’ve seen since the first half of 2020,” said Andrew Dittmar, principal analyst at Embelus. “The standoffs between these two groups regarding fair asset pricing are set to sink M&A activities.”
Since its launch in 2014, crude oil prices have fallen more than 5% per quarterly. According to Enverus, trading activity declined with an average of 30% falling in 11 of those quarters.
The transaction usually takes three to six months to complete, the lawyer says. So the people currently working on it started at the end of last year. Most transactions slowed in 2025, with the pace being a shadow of the past few years. Overall upstream M&A peaked at $192 billion in 2023 and fell to $105 billion in 2024.
Before oil prices collapsed this year, the prices of quality assets were steadily rising. The oil-weighted properties were set to reach the fifth consecutive year of price increases until President Donald Trump’s “liberation day” tariffs put the brakes on.
The Permian Basin, the country’s most prolific oilfield, accounts for 51% of the US total production and was a star attraction for acquisition activities due to its high quality inventory and strong returns. However, most of the best properties have been purchased and are primarily managed by large public companies.
What remains on the market is expensive, and some buyers have matured outside the Permian and started watching mature, emerging plays. Last week, Shale’s pioneer EOG Resources acquired Encino acquisition partner for $5.6 billion to expand its exposure at Utica Shale, Ohio, as it has not made any major deals in nearly a decade.
“This acquisition combines Utica’s large, highest-grown acreage position to create the third basic play for EOG along with the assets of the Delaware Basin and Eagle Ford.”
With the decline in gross prices, M&A activities are heading towards natural gas-weighted prospects to take advantage of the increased demand for LNG and the increasing data center boom in AI fuels.
Spanning Louisiana, Texas and Arkansas, Haynesville Shale is most appealing to buyers due to its proximity to LNG export facilities in the Gulf. “The question now is how we pivot towards something other than oil,” said Mari Salazar, senior vice president and director of Energy Bank at BOK Financial.
Private Equity Group is backed by recent sales to public companies, and is expected to increase purchases this year if crude oil prices are for companies. “We’re committed to providing a range of services to our customers,” said Billy Quinn, managing partner at Pearl Energy Investment, a Dallas private equity company.
The family’s offices, fascinated by the traditional long-term returns of the energy sector, are also entering the space to diversify their holdings. “These families want to play and invest in places where the facility’s capital is flying away,” said Brad Nelson, managing director of investment bank Stevens. “We’re in the early stages where they enter the space. This is not a trend.” (Christina Shevory)
power point
Cobalt Holdings abolished the move to the list in London weeks after it announced its planned $230 million stock, backed by investors, including Glencore.
Texas has removed BlackRock from its corporate blacklist. The Blacklist banned the state’s investment funds due to climate policy.
Traffic for commodity traders around the world warns that “turbulence” in the market will extend into the later part of the year, as geopolitical uncertainty, higher tariffs and inflationary pressures fall at the expense of.
The energy source has been written and edited by Jamie Smith, Martha Muir, Alexandra White, Christina Shevory, Tom Wilson and Malcolm Moore, with the support of FT’s global team of reporters. Contact us at Energy.source@ft.com and follow us on X at @ftenergy. Check out previous editions of our newsletter here.
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