Competition is heating up for increasingly scarce top-tier oil and gas drilling locations in the Lower 48, according to firms that track merger and acquisition (M&A) activity in the sector.

The volume of deals taking place is down versus the averages seen in recent years, new data from Enverus show. But abundant cash reserves, supportive oil prices, and a need to replenish inventory mean that publicly traded exploration and production (E&P) firms may be willing to pay historically high premiums for the best quality assets in premier plays such as the Permian Basin, according to Andrew Dittmar, a director at the firm.

“There is not a cheap way to shore up inventory in the Permian right now unfortunately,” Dittmar told NGI. “I think the largest companies, up to and including...