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Earthstone Expands Due to Acquisition of Titus’ Delaware07/27/2022
Earthstone Energy Inc., based in Texas, announced the transaction on June 28: the acquisition of Titus Oil & Gas which will raise production in the Delaware Basin by 26%.
The $627 million acquisition fills the Permian Basin in Eddy and Lea counties, N.M. with 86 net locations on 7,900 net acres of leasehold, while it is not clear how much of the leasehold might be on federal acreage.
It is Earthstone’s seventh acquisition since 2021, a span that includes the closing of approximately $1.89 billion in acquisitions in the Permian Basin.
The purchase of Titus Oil & Gas Production LLC and Titus Oil & Gas Production II LLC, privately held companies backed by NGP Energy Capital Management LLC, is estimated at $575 million in cash and it is the equivalent of $52 million in stock (3.9 million shares of its Class A common stock based on the June 24 closing price).
According to June 17 strip prices, Earthstone valued Titus’ proved developed PV-10 at $857 million as of August 1, meanwhile, it estimates the next 12 months of adjusted EBITDAX at $320 million to $340 million.
Titus shared that its net production in June was 31,800 boe/d. The company had reserves of approximately 28.9 MMboe. Earthstone is sure its net production will increase, at the midpoint, by 20,500 boe/d (65% oil) in the fourth quarter.
Titus is running a three-rig drilling program on six wells with a 93% working interest in Lea County now. Earthstone considers it will maintain two rigs in the Delaware Basin, two rigs in its Midland Basin position, and add a new rig in the Delaware upon closing the deal. It would increase its Capex by as much as $50 million.
Only after closing the deal, the impact of the acquisition on Earthstone’s guidance for the remainder of the year will be noticeable. Earthstone said its second half production would be about 78,000 boe/d, following its $860 million acquisition on June 2.
As the president and CEO of Earthstone Energy Inc, Robert J. Anderson said, the Titus acquisition followed the way of building scale in the Permian Basin, growing its daily production to around 100,000 boe/d upon closing. Its main goal is adding to a newly established northern Delaware Basin position as it continues to pursue synergies from the two acquisitions completed since the beginning of 2022.
Earthstone’s board and the boards of the Titus entities all approved the deal unanimously. Haynes and Boone LLP and Jones & Keller P.C. represent Earthstone and Bracewell LLP and Jefferies LLC acted as the exclusive financial adviser of Titus.
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Antero Midstream Corp. bought Marcellus assets of Crestwood Equity Partners LP on September 12 for $205 million in cash, signing another sale of noncore assets by the Houston-based company. Crestwood has strategically enhanced its asset portfolio through a series of A&D transactions for the previous 18 months to create a competitive scale in the Williston, Delaware, and Power River basins. The strategy covered acquisitions of Oasis Midstream Partners, Sendero Midstream, and Crestwood Permian Basin Holdings LLC (CPJV), which was a 50:50 joint venture of Crestwood and First Reserve. The assets to be bought cover 72 miles of dry gas gathering pipelines and nine compressor stations with about 700 MMcf/d of compression capacity. The current throughput on the system is approximately 200 MMcf/d, resulting in important available capacity for increase without major capital investment. The deal includes almost 425 undeveloped drilling locations and 120,000 gross dedicated acres from Antero Resources mainly in Harrison County. The acquisition is also anticipated to raise Antero Midstream’s compression capacity by 20% and gathering pipeline mileage by 15%.
The completion of the merger between Centennial Resource Development Inc. and Colgate Energy Partners II LLC happened on Sept. 1, sealing the debut of Permian Resources Corp., which is considered the largest pure-play E&P company in the Delaware Basin. Permian Resources’ idea was to combine two successful E&P companies, creating a better, stronger, and more strategically compelling company. Centennial and Colgate announced an agreement to merge in May, denying rumors that Colgate, a privately held independent Midland-based company, had been seeking an IPO. The merger estimated Colgate at about $3.9 billion and consists of 269.3 million shares of Centennial stock, $525 million of cash, and the assumption of approximately $1.4 billion of Colgate’s outstanding net debt. Permian Resources, being the combined company, has a deep inventory of “high-quality” drilling locations on around 180,000 net acres the companies anticipate will provide more than $1 billion of free cash flow in 2023 at current strip prices, in accordance with the company release on Sept. 1.
On November 2, Cardinal Midstream Partners, an independent Dallas-based midstream energy company, concluded definitive agreements with Medallion Midstream Services to purchase Medallion’s natural gas gathering and processing business in the Delaware Basin in West Texas. The transaction is subject to customary closing conditions and is expected to close in early 2023.
On October 19, Shell USA completed the almost $1.96 billion acquisition of the master limited partnership. The company paid $15.85 in cash for every common unit representing limited partner interests in SHLX not held by Shell USA or its affiliates. A subsidiary of Shell USA has 269,457,304 SHLX common units or roughly 68.5% of SHLX common units.
A $3.0 billion cash definitive agreement to purchase the Eagle Ford assets of Ensign Natural Resources has been concluded by Marathon Oil Corporation on November 2.