⁍ Consolidation in the U.S. shale industry is accelerating, ratcheting up pressure on oil and gas producers to gobble up smaller rivals.

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⁍ The coronavirus pandemic has slashed oil demand and forced struggling shale producers to cut costs.

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⁍ Global majors are not likely to step in, so analysts expect the dwindling universe of notable producers to seek out deal partners.

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– Chevron’s purchase of Noble Energy this month was just the start of a wave of consolidation in the US oil and gas industry, with Pioneer Natural Resources agreeing to buy Parsley Energy for $4.5 billion on Tuesday, Reuters reports. Analysts say the industry is in the midst of a “poignant pandemic” that has forced producers to cut costs and invest less in new fields. “The universe of companies with which you can combine is shrinking by the day,” says Matthew Portillo, managing director at investment bank Tudor, Pickering, Holt & Co. On Monday, Concho Resources agreed to sell to ConocoPhillips for $9.7 billion. That followed Chevron Corp’s $4.2 billion purchase of Noble Energy this month, and Devon Energy Corp’s $2.6 billion all-stock, low premium buy of rival WPX Energy Inc in September. European majors are avoiding new oil and gas purchases, making them unlikely candidates for a deal. “Those without very strong balance sheets are trying to survive,” Concho Resources Chief Executive Tim Leach said in an interview on Monday, when the Conoco deal was announced. Leach said companies with stronger balance sheets will buy weaker firms. Investors are increasingly looking for companies with market values of at least $5 billion, preferably those that pay dividends. While most of the larger shale firms pay dividends, a Refinitiv Eikon index of US oil-and-gas producers has lost 55% this year, compared with the S&P 500’s 7.4% rise. “The outlook for the smaller companies in the sector has diminished,” Portillo says.