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Diamondback's bid for Endeavor tops 1Q deal rankings

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Top US shale field remains focus of energy M&A activity

HOUSTON, April 23 (Reuters) - U.S. oil and gas deals hit

a record $51 billion in the first quarter, a continuation of

last year's fierce merger pace centered in the top U.S. shale

field, data provider Enverus said on Tuesday.

Energy companies have rushed to expand oil and gas drilling

inventories, especially in the Permian Basin of West Texas and

New Mexico, where producer break-even costs are about $64 a

barrel. Oil prices averaged about $77 a barrel last

quarter and this week traded near $83 per barrel.

Most of the high-quality U.S. drilling prospects are in the

Permian "so it is unsurprising the prolific basin was yet again

the primary driver for M&A within oil and gas," said Andrew

Dittmar, Enverus Intelligence Research's principal analyst.

The biggest proposed acquisition last quarter was

Diamondback Energy's ( FANG ) $26 billion bid for closely held

Endeavor Energy Partners, a merger that brings together two

Permian-centric drillers.

Apache Corp parent APA's $4.5 billion deal for

Permian oil rival Callon Petroleum, and natural gas Chesapeake

Energy's ( CHK ) April $7.4 billion deal for Southwestern Energy

rounded out the period's most valuable deals.

The Chesapeake acquisition and last year's blockbuster deals

by Exxon Mobil and Chevron remain stalled by antitrust reviews

in part because they concentrate holdings in the Permian or

Haynesville shale fields, said Dittmar.

"The most likely outcome is all these deals get approved,

but federal regulatory oversight may pose a headwind to

additional consolidation within a single play," he added.

The number of deals rose to 27 last quarter, compared with

20 in the same period a year ago, and 60% of first quarter

transactions by value were in the Permian, Enversus calculates.

That high pace is unlikely to persist, Dittmar said, with

strong oil prices allowing more companies to justify holding

onto non-core drilling assets rather than discard them as they

once did.

"Inventory scarcity is the top theme among E&Ps (exploration

and production companies)," he said.