Oil Price Spike Shifts Deal Flow to Pipelines and Producing Wells
The recent spike in oil prices has caused a shift in deal flow, favoring pipelines and producing wells over new drilling projects. The U.S. Energy Information Administration expects Brent crude to average $87 a barrel across 2026, with Goldman Sachs raising its December 2026 Brent and WTI forecasts by $5 to $85 and $80 respectively.
As a result of the market's focus on delivery risk rather than reserves, capital is no longer being invested in new drilling projects. Instead, it is flowing into existing infrastructure, such as pipelines and producing wells that can be purchased at a known decline rate.
Enbridge Inc., for example, announced its acquisition of Tallgrass Energy's crude oil business for approximately $2.55 billion, expanding its North American crude oil franchise. The portfolio includes a 75% equity interest in the Pony Express Pipeline and a 51% interest in the Powder River Gateway system.
The Williams Companies, Inc. also completed its $5.5 billion acquisition of Momentum Midstream, adding a gathering platform with approximately 6 billion cubic feet a day of capacity in the Haynesville shale. Diversified Energy Company plc announced its definitive agreements to acquire Birch Permian Holdings, Inc. for approximately $1.8 billion.