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The Iran war has brought US oil and gas dealmaking to a standstill after a strong start to the year as volatile crude prices make it difficult to price transactions.
Brent crude surged to $115 a barrel in early trading last week before falling back to settle at $112.19 at Friday’s close following Iran’s attack on a natural gas facility in Qatar.
US oil and gas dealmaking year to date has reached $45bn, its highest in two years, according to Dealogic data, as a result of the merger between two Permian Basin players Devon Energy and Coterra Energy.
But oil and gas talks had slowed or been put on hold as companies waited for markets to calm and crude prices to settle, several bankers and lawyers working on US deals said.
“Everything has just shut down,” said Bryan Loocke, partner at law firm Vinson & Elkins specialising in oil and gas M&A. “I’ve got a couple of deals going, they are longer-term contracts, but everything is in paralysis right now because no one can price anything.”
The predicament has come ahead of CERAWeek in Houston, traditionally the industry’s busiest dealmaking event. The conference was going to be “very different this year”, said one London-based senior energy banker.
“I have three or four disposal processes running and we have put them all on hold,” he said. “There is no point in taking bids, they will be all over the place.”
Following the pandemic, oil and gas companies cleaned up their balance sheets, focusing on efficiency and shareholder returns and leading to a wave of dealmaking.
Industry veterans were predicting another busy year in 2026 as a result of further consolidation in the shale patch, rising international demand for US gas, particularly from companies in Asia, and increased energy demand from the AI build-out.
Under the Trump administration, oil and gas deals have been subject to less scrutiny than during Biden’s tenure, when deals were interrogated by the Federal Trade Commission. Companies may be looking to close deals before the end of Trump’s term in order to take advantage of the permissive environment, said one banker.
“I think volatility is usually bad, but this feels like a bit of a different market,” said Conrad Gibbins, co-head of upstream, Americas at US investment bank Jefferies in Houston.
The rise of asset-backed securities transactions in the oil and gas sector, an alternative to traditional lending based on resource reserves, has also led to increased activity.
“The development of the ABS market has fundamentally changed cost of capital for buyers, bringing access to the investment grade debt markets to a wide range of buyers,” said Gibbins. “More broadly, scarcity of higher quality assets of scale is also driving fierce competition for assets in today’s market.”
Potential takeover targets included private oil operator TRP Energy, LNG company Stabilis Energy and Fort Worth-based upstream oil and gas producer Firebird Energy, analysts said. Exxon and Chevron are also expected to make large acquisitions.
Whether Diamondback Energy — described as the crown jewel of the Permian with its large acreage — decides to acquire or sell was an ongoing “parlour game”, as one lawyer put it.
But dealmaking is expected to be on hold for as long as the Iran outlook remains uncertain.
“Buyers were excited before. There is some dry powder out there with potential buyers that are looking for assets,” said Austin Lee, partner at law firm Bracewell.
“Now it’s a matter of ‘OK, what do we price this at? How aggressive can we underwrite this? Are we going to be able to hedge?’”
Lee added: “There are dynamics that need to settle out before we expect there to be less of a spread between sellers and buyers.”