Shifting Ground: The New Reality of Upstream M&A in 2025

The upstream oil and gas sector is never static. But, 2025 is proving unusually transformative. Global price volatility, cautious capital markets, and a more selective investment climate have fundamentally reshaped how companies approach mergers and acquisitions. For investors tracking upstream oil and gas news, these shifts reflect a structural reset in how the industry views growth, resilience, and future demand. 

For those following upstream oil and gas news, the theme is clear: dealmaking is becoming more selective, more strategic, and significantly larger in scale. Companies are no longer chasing acreage simply because it’s available. Instead, they are acquiring to deepen inventory, fortify supply resilience, and secure advantaged resources that hold up under a wide range of commodity-price scenarios.

This article breaks down what changed in 2025, why it matters across global markets, and how buyers—from independents to national oil companies—are positioning themselves for the next decade of upstream development.

Fewer Upstream Deals, But Bigger Ones

For the seventh consecutive half-year, upstream M&A deal count shrank. Only 85 deals were announced in the first half of 2025—down about 10% year over year, and well below the decade-long average. This slowdown isn’t a surprise. High borrowing costs, wider bid-ask spreads, and persistent geopolitical tension have made smaller operators more cautious and pushed acquirers to be selective.

Yet despite the lower deal count, the total disclosed spending surged to US$71 billion, outpacing the five-year average by a wide margin.

What looks like a contradiction actually reflects a new approach to growth.

Why did the deal value rise despite fewer deals?

• Companies are consolidating rather than trading: The focus has shifted from accumulating small acreage blocks to acquiring entire companies or large-scale positions that transform portfolios overnight. This is a clear pivot toward durable, long-term growth.

• Smaller bolt-on deals are losing appeal: With service costs still elevated and commodity futures volatile, incremental acreage adds less near-term value unless it directly enhances returns.

• Investors reward scale and inventory life: Public markets have consistently priced higher multiples into companies with 10+ years of high-quality inventory. Large acquisitions are now seen as a path to longevity rather than risk.

• Gas-focused assets are drawing more aggressive bidding: The market is betting that gas will play a central role in future energy systems, especially as LNG demand projections remain robust through 2040.

The story of 2025 is about the intentionality behind the ones that actually closed. 

Corporate Consolidation Takes Center Stage, But Megadeals Face New Friction

Corporate-level transactions drove the bulk of upstream M&A spending in H1 2025. Out of US$71 billion in total deal value, US$47 billion came from corporate acquisitions alone that’s generated by just 14 transactions. This concentration shows how a handful of large, well-capitalized buyers are reshaping the competitive landscape. 

But 2025 also revealed a more nuanced reality. While consolidation intent is high, closing megadeals has become increasingly challenging. The year’s most high-profile example illustrates both the strength and the limits of today’s consolidation cycle. 

The Santos Bid: A High-Visibility Test of Upstream Consolidation

A consortium led by an ADNOC subsidiary made global headlines after launching an all-cash offer of US$18.7 billion to acquire Santos, which was well above the company’s market value at the time. 

Had it closed, the deal would have: 

• Marked the largest NOC spending seen since 2012

• Deepened Middle Eastern investment in Asia-Pacific gas

• Reinforced the trend of major buyers pursuing strategic, gas-weighted portfolios

However, after months of negotiation, ADNOC withdrew the offer. However, after months of negotiation, ADNOC withdrew the offer. The collapse underscored a broader M&A theme: valuation friction is widening, especially in regions like Australia where regulatory scrutiny and political sensitivities add complexity.

Instead of becoming 2025’s defining megadeal, the failed Santos transaction now highlights:

• A widening bid–ask gap, even among premium buyers

• Challenging regulatory pathways for foreign acquirers

• Sellers maintaining high valuation expectations

• A shift toward more disciplined, selective corporate M&A

The consolidation is not weakening, but that execution risk has become a central part of the 2025 M&A equation.

A Breakout Year for Gas-Focused M&A

If there’s one segment that defines 2025 upstream M&A, it’s natural gas, as expectations around natural gas demand growth continue to strengthen. Gas-focused acquisitions accelerated for three clear reasons:

1. Rising confidence in U.S. demand growth

Data center expansions, petrochemical restarts, and industrial load growth strengthened multi-year demand expectations.

2. Improved LNG pricing and export visibility

Several Gulf Coast LNG projects advanced toward startup, giving buyers confidence in long-term export-linked pricing.

3. Strategic diversification amid policy uncertainty

With global climate policies shifting unevenly, companies leaned into gas as a lower-carbon, exportable, and transition-resilient fuel. 

Notable Gas Transactions

A few headline deals illustrate this strategic pivot:

• EOG Resources → Encino Acquisition Partners (US$5.6B)

Expanded EOG’s position in the dry-gas-rich Ohio Utica. It also reinforced confidence in multi-decade supply potential and cost-efficiency. 

• EQT → Olympus Energy (US$1.8B)

Consolidated EQT’s position in the Marcellus—North America’s most productive gas basin. The mixed cash-and-stock structure highlighted how buyers are balancing discipline with opportunity. 

Valuations Remain Surprisingly Steady

Oil’s slide from ~US$80/bbl to <US$60/bbl might have suggested a valuation reset. But instead, the Wood Mackenzie ILTOP (Implied Long-Term Oil Price) remained at US$70/bbl, unchanged from mid-2024, reinforcing confidence in long-life, low-decline assets.

Why This Stability Matters

Stable ILTOP implies that:

• Buyers see long-term supply-demand fundamentals as intact

• Sellers are confident enough to hold firm

• Competitive tension remains high for advantaged assets

Assets That Still Earned Premiums

In 2025, investors prioritized:

• Long-life, low-decline assets offering predictable cash flow

• Deepwater projects with improving breakevents

• High-quality shale inventory in proven basins

• LNG-linked gas portfolios with multi-year offtake visibility

The market is clearly rewarding durability over short-cycle opportunism. 

Why M&A Momentum Remains Bullish

Headline deal counts are down. Buyers appear more disciplined. But underneath, the structural drivers of upstream dealmaking remain exceptionally strong. 

Structural Forces Supporting Continued Activity

1. Portfolio longevity concerns

Many mid-sized operators lack enough high-quality inventory for the next decade. M&A is the fastest fix.

2. Delayed energy transition and stronger demand expectations

Updated EIA 2024 outlooks show that there’s a higher-than-expected liquids demand through 2024 and a strong gas demand growth in Asia, the Middle East, and parts of Africa. 

Companies are planning for a future where hydrocarbons remain essential but more competitive. 

3. Shareholder pressure for durable returns

Investors reward scale, low breakevens, and long-lived inventory, which all best achieved through consolidation.

4. Energy security as a policy priority

Geopolitical instability has driven NOCs and governments to secure supply through equity stakes and acquisitions.

What to Watch Next in Upstream M&A

The back half of 2025 and early 2026 may mark the next major M&A cycle. Five themes currently stand out: 

1. NOCs accelerating international expansion

ADNOC, Aramco, and QatarEnergy continue targeting long-term gas and liquids positions, especially where LNG ties are strong.

2. U.S. shale consolidation continuing

Several private Permian, Marcellus, and Haynesville players remain highly attractive to large independents and majors as U.S. shale consolidation continues.

3. LNG strategies becoming more central

Expect more deals in basins with clear pathways to export capacity, particularly Gulf Coast-adjacent gas regions.

4. Companies refining their “transition-proof” portfolios

Deepwater, advantaged gas, and low-emissions barrels are becoming core holdings.

5. More emphasis on cost-efficient barrels

Lower breakevens and lower emissions per BOE are emerging as key investment screens for both buyers and shareholders.

Conclusion

The upstream M&A landscape in 2025 is not a temporary reaction to price swings, but it reflects a structural realignment of how companies pursue growth, manage risk, and secure long-term resource longevity. Even with geopolitical fractures, cautious lenders, and volatile spot markets, buyers are signaling confidence in the next two decades of oil and gas demand. Corporate consolidation, renewed gas strategies, and stable valuation metrics show that upstream portfolios are being redesigned for resilience, not retreat. As global energy systems shift, the companies winning deals today are the ones positioning themselves for a more competitive and more capital-disciplined future.

FAQs

Why are there fewer upstream M&A deals in 2025? 

Higher capital costs, valuation gaps, and commodity price volatility have pushed companies to pursue fewer but larger strategic transactions. Buyers prefer scale, inventory depth, and operational synergies rather than small incremental acreage deals.

Why is natural gas attracting more acquisitions this year? 

U.S. demand growth, expanding LNG export capacity, and long-term diversification strategies are increasing interest in gas-rich assets. Multiple basins show multi-decade development potential, making gas an appealing “bridge fuel” with resilient market fundamentals.

What is the ILTOP metric used in valuations? 

ILTOP (Implied Long-Term Oil Price) is a valuation benchmark used by Wood Mackenzie to estimate the long-term price assumption embedded in acquisition models. It helps normalize comparisons across deals by assuming a 10% discount rate.

Are NOCs really increasing their upstream M&A activity? 

Yes. National oil companies have re-emerged as major buyers in 2025, particularly in gas-focused markets. ADNOC’s bid for Santos is the largest potential NOC-led upstream acquisition in more than a decade.

What types of assets currently command valuation premiums?

Long-life deepwater fields, high-quality shale inventory, LNG-linked gas positions, and low-breakeven conventional assets are receiving the highest premiums due to their economic durability and cash flow resilience.