Why oil & gas assets are back in vogue

Over the last 18 months, private equity (PE) has dramatically re‑embraced oil & gas assets

This is a significant change in course for the Cap Stack Cowboys, if not a full 180 degree turn – what had once been sidelined in favor of renewables is now firmly back at the table. The reason? A confluence of strategic divestitures, powerful macro themes, and patient capital seeking stability and yield.

According to S&P Global, PE investment in fossil fuels surged from US$6.61bn to US$15.31bn in 2024, marking a staggering 131% year‑on‑year increase. Notably, the second half of 2024 alone saw over $10.17 b funnelled into oil and gas assets, far surpassing the US$5.14 bn invested in renewables during the same period, this at a time when the world was battling the twin pressures of a geo-politically volatile world and grappling with demand uncertainty from key Asian economies of China and India. 

Big oil’s strategic pivot away from non-core assets – driven by capital discipline – has opened the door for PE liquidity. As big oil continues to streamline portfolios, there will be opportunities for private players with a strategic intent to pick up a piece! These deals provide PE with discounted entry points and operational upside.

Strategic drivers: AI, energy security, and yield

A pivotal factor: data‑centre power demand. Generative AI developments are amplifying energy needs – datacentres alone could consume 8% of U.S. power by 2030, up from 3% in 2022 . That energy cannot reliably come solely from weather-dependent renewables, reviving interest in gas and oil.

Simultaneously, geopolitical concerns, especially following January’s U.S. executive orders favouring domestic fuel, have boosted PE exit activity. By May 21, 2025, PE exits in fossil fuels reached US$18.54 bn, nearly outperforming all of 2024’s US$19.41 bn.

Private equity firms are now deploying capital into oil and gas with a not seen before aggression and strategic intent. Carlyle’s Private Credit arm recently struck a potential US$2bn deal with Diversified Energy, a move that taps into steady cash flows from mature U.S. wells. Meanwhile, Post Oak Energy Capital closed its fifth fund at US$600mn (with total commitments reaching US$764mn), focusing on mid-market upstream players like Diamondback and Permian Resources. Similarly, Waterous Energy has raised nearly US$1bn (CAD 1.4bn) with plans to consolidate smaller Canadian producers, aiming to build scale and eventually list them publicly.

This resurgence is driven by three key factors. First, the predictability of cash flows from producing wells offers an attractive risk-adjusted return profile, particularly in a yield-starved global market. Second, a steady divestment pipeline from oil majors – eager to streamline their portfolios – provides PE firms access to non-core assets at reasonable valuations. And third, macroeconomic tailwinds, including global energy security concerns, soaring datacentre-driven power demand, and buoyant exit valuations, have created fertile ground for renewed activity.

That said, the sector is not without its risks. Transition pressures remain acute: despite rising demand from AI infrastructure, the broader global push toward decarbonisation continues to pose reputational and regulatory headwinds. In addition, oil and gas prices, though relatively stable in the $70–90 per barrel range through 2024–25, remain inherently cyclical and susceptible to geopolitical shocks.

The private equity community is not merely returning to hydrocarbons – it is doing so with a more refined playbook. The most successful firms will be those that blend downside protection through conservative capital structures, strong operational capabilities to enhance asset performance, and a clear path to exit – whether through trade sales, public carve-outs, or securitised cash flow instruments.

Oil & gas are no longer taboo for private equity. Renewed appetite – driven by attractive entry points, cash-yield stability, and macro momentum – has sparked a renaissance. The firms that win will execute with discipline, structure smart deals, and mindfully time exits under an increasingly watchful ESG and regulatory lens.

This article is authored by Synergy Consulting IFA