Enverus says that US energy mergers could slow down in 2025 due to smaller deal sizes.

According to an Enverus report released on Tuesday, the pace of U.S. public-to-public upstream mergers in 2025 could slow from its recent average of five mergers per year and deal sizes may also decrease.

Consolidation in the U.S. Energy Sector, which resulted in deals worth $250 billion by 2023, continued into 2024, and will likely continue into this year as companies seek to increase their oil and natural gas reserves.

As a result of the wave of mergers, fewer companies were available and fewer pockets were empty. Some announced combinations, however, have been delayed by either antitrust regulations or contract arbitration challenges.

Enverus analysts stated in a report that the need for scale will motivate small and medium-cap E&Ps to pursue M&As, despite the fact that deal sizes may fall and break-evens on acquired inventory could rise.

The pool of remaining private equity assets has shrunk, or is higher on the curve in terms of cost or both.

Long laterals, the horizontal part of an oil-well, will help improve the economics for the land that is available to drill. They can save up to $5 per barrel per mile.

According to the report, longer laterals will be crucial in reducing well costs, as they were in 2024. Select operators are expected to use more three-mile laterals, and even some four-mile ones.

The company also expects that well costs will remain flat in 2025, after nearly 10% of the per-foot expenditure on wells had been reduced in the year prior.

According to experts and executives from companies, producers will extend their wells up to three miles in August 2024. This will boost production by fracking multiple wells simultaneously.

The Enverus analysts stated that "we expect completion crews and rigs to continue making efficiency improvements in 2025. This will put downward pressure on the overall equipment utilization." The majority of activity would be dominated by public companies who prefer high-spec rigs, electric frac equipment and other top-spec equipment.

Enverus Intelligence research analysts predict Brent prices will average $80/bbl by 2025, assuming OPEC+ won't unwind their cuts unless they push prices down, and that demand from China remains flat. (Reporting from Seher Dareen, Bengaluru. Editing by Pooja Deai.)

(source: Reuters)