Uncertainty in market causes U.S. upstream M&A slowdown to continue through 2026

The M&A market plays a crucial role in shaping the performance of any industry, including the energy sector. In the United States, the outlook for upstream M&A activity in 2026 appears grim, as industry experts have observed a slowdown in mergers and acquisitions levels for the current year, with expectations of this trend extending into the following year.

After a promising start to 2025, the US upstream M&A landscape witnessed a consistent decline in activity over the subsequent quarters, a pattern that is likely to continue into 2026 amidst heightened market uncertainties. The ongoing conflict in Ukraine has introduced significant volatility into the international energy market, leading many investors to perceive the upstream sector as a risky venture.

Persistent low crude prices have further compounded the challenges facing the industry, with fluctuating energy market prices cited as a significant factor contributing to the subdued performance. Private equity-backed oil and gas firms have been the main drivers of M&A activity in recent years, with the majority of transactions dominated by companies with oil-weighted assets.

Andrew Dittmar, Principal Analyst at EIR, highlighted the challenges faced by sellers, particularly private equity firms with oil-weighted assets, in a low-price environment. He noted that the current market conditions require stronger pricing to justify public companies paying for undeveloped locations, adding to the complexity of M&A deals in the sector.

To revitalize the M&A landscape, industry experts emphasize the importance of strategic consolidation and targeted acquisitions as key strategies for moving forward. Despite the overall slowdown, some positive developments have been observed, such as Crescent Energy’s acquisition of Vital Energy for over $3 billion and California Resources Corporation’s purchase of Berry Petroleum for around $717 million.

Natural gas has emerged as a bright spot in the upstream energy sector, with increasing demand from data centers driving optimism among potential buyers. Despite the challenges posed by ongoing geopolitical tensions, particularly in relation to Russian energy sanctions, strategic consolidation and targeted acquisitions are expected to drive M&A activity in the energy sector.

As the world transitions towards a future without Russian energy, European gas prices have eased somewhat, offering potential opportunities for market players. However, uncertainties stemming from geopolitical developments and the volatile energy market continue to cast a shadow over the outlook for energy M&A activity.

In conclusion, the U.S. upstream M&A landscape is facing a challenging environment in 2026, characterized by market uncertainties, geopolitical tensions, and fluctuating energy prices. Strategic consolidation and targeted acquisitions are expected to be key drivers of M&A activity in the energy sector, as industry players navigate the complexities of a changing global landscape.