Global upstream mergers and acquisitions are on track for another strong year as a deep deal pipeline faces tougher execution amid volatile oil prices and geopolitical risks, Rystad Energy said in a Thursday note.
"Oil price volatility has created a deeper opportunity set, but it has also made deals harder to execute," said Atul Raina, Vice President, oil and gas M&A at Rystad.
Raina noted that prompt crude prices are also posing a hurdle. "Sellers are looking at elevated spot prices and near-term cash flow, while buyers are underwriting against a backwardated price strip and the possibility that current conditions may not last," he added.
The sector is on track to surpass 2025's $175 billion upstream M&A total, with nearly $130 billion in deals announced through August 2026.
Another $137 billion in opportunities remains on the market, with about one-third of that pipeline needing to close for 2026 deal value to exceed last year's level.
Global upstream M&A deal value climbed 55% over the year to about $100 billion in the first half, while the number of deals fell 12% to 217.
North America generated over $68 billion during the period, representing 68% of global first-half deal value.
Shale transactions exceeded $63 billion, accounting for 92% of North American activity and 63% of global upstream M&A.
Devon Energy's (DVN) $25.1 billion merger with Coterra Energy and Shell's (SHEL) $16.4 billion acquisition of ARC Resources together represented 41% of global deal value.
The Middle East conflict affected deal activity, with about $56 billion, or 56%, of first-half transactions announced before Feb. 28, when the conflict began.
Deal activity stayed relatively slow from March to June, with about $44 billion announced during the period, even though oil prices remained near $99 a barrel.
That monthly deal pace marked the lowest average since 2016, when activity averaged $10.7 billion a month, and 2020, when it averaged $8.6 billion.
Uncertainty around oil prices is prompting more exploration and production companies, especially private US shale firms, to consider selling assets.
This has pushed the potential deal pool up to $137 billion, from roughly $98 billion before the conflict. However, the same uncertainty is making it harder to agree on prices and close transactions.
Rystad expects deals to increasingly use delayed or performance-based payments, flexible closing dates, and stronger exit terms to help buyers and sellers manage risk.
International M&A also picked up, with deal value outside North America rising 7% over the year to over $32 billion in the first half.
South America accounted for about $13 billion, helped by activity in Argentina, while Africa attracted renewed interest from major oil companies buying offshore exploration assets in Angola and Namibia.
About $52 billion in international assets are still available, according to Rystad.
Rystad expects large oil firms to drive much of the remaining activity by selling stakes, bringing in partners and reshaping their portfolios while freeing up capital for other projects.
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