As major U.S. oil giants like Exxon Mobil, Chevron, and ConocoPhillips continue to acquire smaller companies, Energy Private Equity (PE) firms are preparing for their turn to capitalize on non-core asset sales from these supermajors. However, the current turmoil in crude oil prices and shifting tariff policies has delayed this next wave of mergers and acquisitions (M&A). Energy Private Equity investors are working behind the scenes, cautiously awaiting clearer signs of market distress or opportunity before deploying their significant capital reserves.
Mark Teshoian, managing partner at Kayne Anderson, emphasized that uncertainty often presents compelling investment chances. Kayne Anderson recently closed a $2.25 billion energy fund, surpassing its $1.5 billion goal, and committed $400 million to a new oil and gas startup, South Wind Exploration & Production. Despite this, South Wind has yet to make major acquisitions, reflecting a broader hesitation among PE firms as they navigate volatile market conditions.
Market Conditions and Deal Activity Face Headwinds
The largest energy deals of 2024 included Exxon’s $60 billion purchase of Pioneer Natural Resources, ConocoPhillips’ $22.5 billion acquisition of Marathon Oil, and Diamondback Energy’s $26 billion deal for Endeavor Energy Resources. Chevron’s planned $53 billion acquisition of Hess is pending due to arbitration issues, further adding to market uncertainty. Analysts note that tariff fluctuations and lower oil prices have widened the gap between buyer offers and seller expectations, slowing deal momentum.
Andrew Dittmar, principal analyst at Enverus Intelligence Research, highlighted that while public companies aggressively pursued consolidation, Energy Private Equity is prepared to act once non-core assets become available. Yet, many deals are on hold as buyers and sellers struggle to find common ground amid economic uncertainty and tariff-driven cost pressures.
Smaller Deals and Focus on Natural Gas Signal Shifting Priorities
Some PE-backed startups, such as those funded by Post Oak Energy Capital, continue to pursue smaller, strategic acquisitions valued closer to $10 million rather than blockbuster deals. Frost Cochran, Post Oak’s managing director, expects a slow M&A market this year with increased activity possible in 2025. These firms are concentrating on “bolt-on” acquisitions that strengthen existing holdings while waiting out market volatility.
Despite the challenges for oil assets, natural gas has drawn more bullish interest recently. For example, a $1.8 billion deal for Blackstone-backed Olympus Energy in the gas-rich Marcellus Shale region highlights this trend. Rising U.S. grid demand, projected to increase significantly over the next few decades, fuels optimism for natural gas investments. Ben Davis of Energy Spectrum Capital noted this growing demand, especially for gas-fired power supporting LNG exports and data centers.
Given recent consolidation and cyclical price fluctuations, Energy Private Equity (PE) firms are adopting longer-term strategies with their portfolio companies, focusing on cash flow and sustainable returns rather than quick asset sales. As Davis put it, “It’s a very tough time to sell assets. People want to see how the dust settles,” underscoring the patient yet strategic stance of private equity in today’s oil and gas landscape.
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