Higher Oil Prices Are Holding Back Some Deals, Says M&A Lawyer Spottswood

Summary

• Volatility in oil prices has become the new normal for energy M&A, with deal makers adapting and activity continuing despite uncertainty.
• Cash deals for upstream assets are unlikely to be announced soon due to difficulty in valuation when future oil prices are unpredictable.
• If oil prices settle structurally higher (e.g., due to prolonged geopolitical risks), it would be highly positive for energy M&A, leading to healthier companies, stronger balance sheets, and more aggressive buyers.
• Large oil majors like Exxon, Chevron, ConocoPhillips, and Diamondback have largely digested past acquisitions and are poised for more deals, as energy companies must constantly seek growth.
• The current regulatory administration is more friendly towards energy development and large-scale infrastructure projects compared to the Biden era.
• Antitrust scrutiny has eased, with less political targeting of deals unrelated to gasoline prices (e.g., natural gas mergers) and reduced general cynicism about scale.
• Geopolitical conflicts in the Middle East, such as Iran targeting oil infrastructure, introduce uncertainty that could delay deals but may also support higher structural oil prices.
• Long-term macro trends favor consolidation in the energy sector, driven by the need for companies to grow or shrink based on asset turnover.
• The forward curve for oil prices is critical; deal activity may pick up once there is more clarity on future price strips.
• Energy M&A practice has grown resilient to volatility, with talks ongoing even when transactions are paused.