Good morning; here's what the Oilman has for you today:

• Dealmaking in U.S. Shale Picks Up

• Rates Rise to 22-Year High

• Upcoming Oil and Gas Events

• Tweet of the Day

Dealmaking in U.S. Shale Picks Up

Consolidation and private equity exits from shale drove greater M&A activity in U.S. oil in the second quarter.

E&P deals in the period hit $24 billion, which was three times higher than the volume of first-quarter deals.

Time to say goodbye to private equity

"The formation of new private-equity backed E&Ps hit its peak in 2017, and now, six years later, those investments are being unwound via sales to public companies."

That’s according to Andrew Dittmar, a director at Enverus, which reported the data.

At the same time, as PE exits shale, public Big Oil likes to grow in it and is happy to snap smaller rivals.

It is also happy to expand its acreage in the sweetest spots.

Remember Ovintiv and Civitas? These were two of the biggest acquisition deals for the quarter.

Ovintiv spent $4.3 billion on three asset purchases in the Permian, and Civitas paid $4.7 billion to take some acreage off the hands of their former PE owners.

Gas players are nowhere to be seen

One interesting outtake from the Enverus report was that dealmaking in the gas segment was virtually nonexistent.

Perhaps one big reason for this was the price collapse that started late last year and continued this year.

Perhaps another reason was weaker export demand as Europe remains stuffed with LNG it bought last year.

It’s still interesting because while M&A appetite for gas is low, the appetite for new LNG export capacity seems quite high.

It’s likely that as winter approaches, things will change as demand for U.S. LNG will pick up inevitably.

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Rates Rise to 22-Year High, What’s Next for the Oil Patch?

The Federal Reserve this week hiked interest rates by another quarter of a percentage point.

The otherwise small hike has brought rates to the highest in 22 years.

That’s bad news for the oil patch.

Borrowing costs are not your friend

Oil executives have already been complaining about rising borrowing costs.

The last two Dallas Fed energy surveys have noted this as a major obstacle to growth.

And here’s the Fed again, hiking further because it feels right…?

It must be that because the hikes have so far failed to deal with inflation in any decisive way.

Actually, they may be feeding inflation, as many analysts warned.

Because every producer of something would try and pass the higher borrowing costs on to — guess who?

Yep. You and me, and the guy next door.

Higher rates = lower production

It’s the natural order of things.

If it’s too expensive to produce something, you won’t produce it, or at least you’ll produce less of it.

Oil is no exception, regardless of the bright demand outlook that banks are waving around.

As if U.S. oil drillers needed another reason to go easy on production growth besides federal government policies and price uncertainties.

Not only that, but the Fed has signaled it might well hike again before this year’s end.

Chances are, the rig count will continue to decline, maybe even faster than it is declining now.

Poor DoE will never refill the SPR at the rate things—and prices—are going.

Upcoming Oil & Gas Events

• July 28: SOOGA Annual Industry Boat Ride, Valley Gem, Marietta, OH

• July 31-Aug 2: 2023 Railroad Commission of Texas

• August 3-4: OOGA Summer Meeting, Belmont Hills Country Club, St Clairsville, OH

Around the Global Patch

🇺🇸 SunGas invests $2B in green methanol facility, Louisiana.
🇩🇪 Completion of EnviTec's Bio-LNG plant in Germany.
🇷🇺 Fate of Russia's oil and gas industry after government collapse.

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