A&D Trends at the Forefront of an Evolving Energy Sector

Building on the momentum of a productive acquisitions and divestitures (A&D) environment in 2025, oil and gas deal activity could be robust this year, as initial data shows potentially strong fundamentals of the U.S. energy sector – even as heightened geopolitical tensions and commodity price volatility add near-term complexity.

While the spotlight in prior years often focused on the Permian Basin, activity is now occurring across six or seven major U.S. basins, reflecting a more diversified market and a wider range of interest. As we move through the first half of the year, gas-weighted assets could represent a meaningful portion of transaction flow, possibly continuing a trend observed in the fourth quarter of 2025.

In fact, demand for gas assets has been building since mid-2024, driven by improving price expectations and growing conviction in structural demand from power generation – particularly due to the rise of AI and the proliferation of supporting data center infrastructure. This phenomenon has been a feature of recent oil and gas activity, as buyers have become increasingly willing to look beyond short-term commodity price weakness to capture potential long-term upside.

Outsized interest in gas

Stephens’ recent experience advising Blackbeard Operating on the divestiture of upstream and midstream assets in the Arkoma Basin illustrates the depth of the demand. Buyer interest materially exceeded internal expectations, with the process notably attracting significant participation from family offices. As a secondary basin, Arkoma has historically attracted less attention than core gas plays, such as Haynesville or Marcellus. However, the Blackbeard deal demonstrated that buyers are increasingly willing to look beyond the most obvious geographies when the fundamentals and inventory support a long-term thesis.

Within oil, Stephens was involved in the transformative 2025 deal that saw PEDEVCO Corp. merge with certain Juniper Capital oil-weighted portfolio companies in the Northern DJ and Powder River basins. This transaction allowed the sellers to maintain exposure to the upside via public equity. It may not be the last deal of its kind, as several established private equity-backed companies in these basins could be attractive merger partners for the remainder of 2026 and beyond.

While the oil price hovered around $60 a barrel for much of last year, oil price dynamics have changed materially since the outbreak of international conflict in the early part of 2026, with shipping pressures pushing crude prices above $100 per barrel. In 2026, oil prices have been extremely volatile. Market participants are increasingly factoring in a higher-for-longer oil price environment, even if geopolitical tensions ease in the near term. Against this backdrop, U.S. barrels may soon be seen as a stable and dependable source of supply, relative to regions exposed to elevated tensions.

The rise of family offices

One of the most significant structural changes in the market in recent years has been the investments of family office capital to fill the gap left by a slowing private equity fund environment. Stephens has been an active participant in this rise, having been involved in nearly $500 million of capital flow from family offices in recent years.

The participation of sophisticated family offices in the oil and gas space is a trend that could accelerate throughout 2026, for several reasons. First, as public and private oil and gas assets trade at historic lows – often 3x to 4x cash flow – family offices have increasingly viewed energy as a value play. Also, with many family office time horizons stretching beyond a decade, these often contrarian investors are sometimes less concerned with timing the exact bottom of a commodity cycle.

In addition, the fundamental make-up of the energy industry has evolved significantly in recent years, with balance sheets across the industry now meaningfully healthier than in prior cycles. An emphasis on yield has improved investor confidence, with double-digit yields sometimes available and potentially attracting capital from family offices, though such yields are not guaranteed and may not persist.

Appeal of non-operated interests

Another noticeable trend in the oil and gas space has been an uptick in investor interest in the non-operated (non-op) market. Over the past decade, this segment has evolved from a niche strategy into a mainstream allocation for some institutional and family office capital.

Today, multiple publicly listed non-op companies operate at scale, supported by a deepening pool of private capital. The appeal is driven by predictability, diversification and alignment with high-quality operators. Family offices, in particular, have shown strong interest in the non-op space. Unlike prior allocations to ‘blind pool’ private equity funds, family offices are able to more easily evaluate these identifiable assets.

Expectations of another active year

Looking ahead, the current conflict is likely to dominate oil and gas sector news flow for the foreseeable future. Nevertheless, from a local A&D perspective, the remainder of 2026 could remain active, particularly in the middle market, at transaction sizes between $100m and $1bn. Asset-level deals could outnumber corporate transactions, reflecting the sheer volume of assets available. Buyer interest could be robust across both oil and gas, supported by healthier industry fundamentals and a diverse capital base eager for yield.

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