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Earthstone Expands Due to Acquisition of Titus’ Delaware

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.

If you are further interested in learning about the deals in the Delaware basin or about upstream/midstream M&As companies and their assets, please, contact our Houston sales office or SCHEDULE A DEMO to learn how Rextag can help you leverage energy data for your business. Tel. +1 713-203-3128 Email: treitmeier@hartenergy.com

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Potential Deal for $5 Billion: Tug Hill and Quantum Energy Seek Sale

Undisclosed industry sources said that THQ Appalachia I LLC (Tug Hill and Quantum Energy) is seeking a sale of the U.S. natural gas producer for more than $5 billion, including debt. Mainly operating in the Marshall and Wetzel counties in West Virginia, THQ Appalachia has net production of around 760 MMcf/d. Despite volatility in commodity markets which has made the valuation of energy producers tougher, THQ Appalachia is anticipating more than $5 billion due to the worth of its existing production and the possible value of its undeveloped acreage, the sources said on June 17. Additionally to purchasing THQ Appalachia, possible bidders in the sale process also have the opportunity to buy XcL Midstream, the pipeline firm that moves the company’s gas to market and has the same CEO as in Tug Hill. If the same buyer chooses to purchase XcL, the deal consideration will increase further. However, the anonymous sources admitted that the sale depends on the market conditions and is not guaranteed since Tug Hill and Quantum could ultimately decide to retain some or all of THQ Appalachia and XcL’s assets. Tug Hill and Quantum refused to comment on these statements and XcL did not respond to a comment request.

According to a press announcement on June 29, Baker Hughes got a contract to supply electric-powered Integrated Compressor Line (ICL) decarbonization technology and turbomachinery equipment for an upcoming natural gas transmission project by a subsidiary of Tellurian Inc. – Driftwood Pipeline LLC. Driftwood Pipeline decided that the projects of Lines 200 and 300 would be situated in Beauregard and Calcasieu Parishes in southwest Louisiana and it will be the first time when Baker Hughes installs its ICL technology for pipeline compression in North America. Joey Mahmoud, president of Tellurian Pipelines, says the company expects that the project will give upwards of 5.5 Bcf of natural gas every day, with virtually no emissions. As a part of the agreement, Tellurian makes the initial $240 million pipeline investment as part of the broader Driftwood Pipeline system, which will keep enhanced supply reliability to meet the area’s projected industrial enlargement in a purer, more sustainable way. Baker Hughes has installed over 50 ICL units across the different pipeline and offshore applications, mainly in Europe. The compressors exert a reduced environmental footprint because their hermetically sealed casing prevents emissions from obviating. It is important to mention, that they require minimal downtime as magnetic bearings are resulting in more efficient operations and low maintenance.

On 27 June, the analysts at Kpler spread the word that the exports of crude oil from the U.S. Gulf Coast could break a record 3.3 MMbbl/d this quarter as Europe has regard to U.S. crude which can outweigh sanctioned Russian oil. Due to Washington's decision to release 180 MMbbl of oil from the nation's Strategic Petroleum Reserve, U.S. exports have increased in the last three months, as it has flooded the domestic market. Exports to Europe are anticipated averaging approximately 1.4 MMbbl/d this quarter, about 30% higher than the year-ago quarter, meanwhile, export to Asia is set to decrease to less than 1 MMbbl/d. Despite that the U.S. has lost about 1 MMbbl/d of refining capacity since 2020, it also boosted exports thanks to the government’s intervention to back crude supplies which has had consequences in growth in exports. Throughput via the Port of Corpus Christi has grown by more than 150,000 bbl/d and has become 1.86 MMbbl/d. Nevertheless, Port of Houston exports also have been increasing since the third quarter of last year, they remain below pre-pandemic levels.

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). 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.

2022 blog posts