As relationships go, it’s complicated. The sentiment for A&D activity in 2016 seems to swing widely—from the thrill of blockbuster deals to the dread that barbaric Visigoths have been seen in the vicinity of the Wolfcamp.

The dichotomy is clear with a casual glance at two prominent oil-producing basins. E&Ps are basking in the glow of Permian Basin values while, for instance, shrouded in doubt in the Williston Basin. The downturn has left little in the way of middle ground through the first half of the year, according to Deloitte LP’s Oil & Gas Mergers and Acquisitions Report – Mid-year 2016.

The good: through July, deals of at least $20 million are up by 28%, to 64 from 50 in 2015, according to Socotia Waterous. Likewise, total transaction values have been consistently up since April. In July, U.S. deal values were a full $6.2 billion higher than 2015—a 38% increase.

However, those figures aren’t even close to the halcyon stroll that deals took two years ago. In July 2014, U.S. deal values were more than double what they were now—a staggering $47.7 billion, Scotia data shows.

Such, such are the woes of a downturn.

John England, vice chairman and U.S. oil and gas leader for Deloitte LP, said the first half of 2016 saw a “slight uptick” in the upstream sector in the number of deals. From a global perspective, the decline in total value is stark when compared to the first half of each of the previous five years.

“The volume of deals remains historically low across all oil and gas sectors,” England said.

However, last year’s deal tally is somewhat skewed by an international deal. Royal Dutch Shell Plc’s (NYSE: RDS.A) $70 billion acquisition of BG Group accounted for 77% of total deal value.

“Excluding that one deal, total deal value would have almost doubled from first-half 2015 to first-half 2016, showing a more positive trend,” he said.

Pride and Permian

The industry’s love affair with the Permian Basin, and its move into the Delaware Basin, has helped keep deals and values afloat for the first half of 2016 and into August.

As acreage values keep rising in the Delaware, E&Ps keep buying. Other plays, especially the Oklahoma Stack, have also prospered.

Not surprisingly, Permian Basin activity and values were at the forefront, according to Raymond James.

Across the Midland and Delaware basins, more than 180,000 acres changed hands in 13 deals. At a price of roughly $3.1 billion, an acre of Permian land cost an average of $17,000.

Some deals stood out more than others.

In early August, SM Energy Co. (NYSE: SM) spent $980 million in the Midland Basin with the purchase of 24,783 net acres in Howard County, Texas.

To put the price in perspective, SM Energy spent the equivalent of 22% of its $4.5 billion enterprise value on the deal.

The acquisition more than doubles the Denver-based company's Midland footprint to about 46,750 net acres from roughly 20,000 net acres.

After its success in the Midland Basin, Diamondback Energy Inc. (NASDAQ: FANG) coiled up and struck into the Delaware Basin in July with a deal to add roughly 19,000 net acres for $560 million. At a price of $27,000 per acre, Diamondback set a (momentary) high point in the Delaware.

In the Midland Basin, Laredo Petroleum Inc. (NYSE: LPI) spent another $150 to buy McClure Oil Co. Inc.’s interests in 9,200 net acres in Glasscock and Reagan counties, Texas.

And in late June, QEP Resources Inc. (NYSE: QEP) agreed to buy 9,400 net acres from RK Petroleum for $600 million in a record deal. After adjusting for production, analysts said the acreage went for $58,000 to $63,829 per acre.

England said that producers’ renewed interest in the Permian Basin, a longtime conventional basin first commercially drilled in 1921, stems from its favorable characteristics relative to other unconventional oil basins.

“Its unique stacked play geology lends itself to high efficiency gains and well productivity, driving costs considerably lower than other regions on a per barrel basis,” England said. “Similarly, on the natural gas side, the Marcellus play has prolific wells and a lower cost structure than other basins.”

To begin August, Antero Resources Corp. (NYSE: AR) said it had seized more Marcellus Shale interests in a $96 million deal with Statoil ASA (NYSE: STO).

The deal shores up Antero’s working interest in a position it previously agreed to buy from Southwestern Energy Co. (NYSE: SWN) in June. The deal included about 55,000 net acres in the core of the Marcellus Shale for $450 million.

The Scarlet Ledger

With tight financial constraints on public E&Ps preventing deals, England said private equity could have jumped in to the A&D game. Early on, private equity purchased numerous gas assets.

However, England suggested that private-equity firms have since been on the sidelines. While it continues to fund various management teams that will hunt for targets of opportunity, “private-equity-funded activity has been muted as commodity price volatility created transaction price disparity and potential upstream sellers have been able to delay dispositions of their prized properties” to generate cash flow.

Less than 10% of upstream transactions in the first half of 2016 involved a private-equity company, Deloitte said. Instead, firms are looking at alternatives to “classic buyouts” to deploy capital, including debt buybacks and private investment in public equities (PIPE).

Bankrupt companies, another area analysts and deal brokers saw as potential for A&D, have also largely avoided liquidation or asset sales. Out of 136 announced deals in the first half of 2016, just three involved companies selling assets. Deloitte attributes this to the trend of E&Ps entering bankruptcy with pre-packaged deals with lenders to restructure debt.

“However, with 77 upstream companies in bankruptcy as of mid-2016, more assets are expected to come to market over the next year,” England said.

Gone With the Wellbore

What’s next for companies is likely more life inside a pressure cooker.

U.S. production has slowed considerably, helping to raise prices somewhat. Al Walker, Anadarko Petroleum Corp.’s (NYSE: APC) chairman, president and CEO said $60 oil is possible by the end of 2016.

“The cautious approach we outlined for oil price recovery at the beginning of 2015 has played out much as we anticipated,” Walker said in a late July earnings call. “It now appears U.S. oil supply peaked at around 9.6 MMbbl/d and we expect it to bottom out around 8 MMbbl/d.”

Yet Saudi Arabia pumped out a record 10.67 MMbbl/d in July.

The longer prices stay at or below $50, the more strain it will put on sellers, who have been remarkably resilient in the face of months of depressed commodity prices, England said.

“The oil and gas sector is also facing unprecedented capital challenges as traditional lenders confront their own regulatory hurdles and are reluctant to commit capital, exacerbating some of the operating challenges in the extended price downturn cycle,” he said.

As access to capital tightens, companies will likely look harder at whether to divest their prized assets, while prices may require companies to reevaluate their cash flows.

“The timing of a revival in M&A activity will be influenced by the stability of commodity prices, openness of the debt markets and global economic growth,” England said.

Darren Barbee can be reached at dbarbee@hartenergy.com.