Oil deals decline — but a big rebound may loom

This look ☝️ at the decline in U.S. oil and gas deals may be illustrating the calm before the storm, Ben writes.

Driving the news: The latest KPMG report shows a big drop in Q1, continuing last year's decline tracked by the firm, and other analysts.

• But industry observers say several forces — notably companies sitting on lots of cash — could bring fresh consolidation.

What they're saying: "A wave of shale deals, reminiscent of upstream mergers in 2020 and 2021, may hit the Lower 48 over the next 12-18 months," KPMG's Mike Harling tells me via email.

• Producers want to "secure inventory, create operational efficiencies and put their capital to work," said Harling, KPMG U.S.'s energy deal advisory and strategy leader.

The big picture: Harling is hardly alone.

• Enverus' Andrew Dittmar says many publicly traded companies want more inventory. And multiple private equity-backed asset holders, especially in the prolific Permian Basin, are looking to sell.
• "While adding this inventory likely won’t be cheap, in the long run it’s a less costly decision than running out of acreage to drill," he said via email.

The intrigue: Bloomberg reports that new mergers could be a fresh check on the production growth rate in the Permian.

• "Companies are looking to buy up rivals to secure drilling sites for the future — not to boost their output immediately," they report.

What we're watching: Whether a mega-deal is lurking with industry balance sheets strong.

• The Wall Street Journal reported this month that Exxon held preliminary talks with shale giant Pioneer Natural Resources, which has a market cap of $52 billion.