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Non-core Permian assets to be sold for $160 million by Diamondback Energy in a massive Drop-Down Transaction
10/28/21
Diamondback Energy Inc. intends to reduce its debt through the divestment as it pivots to its core Permian Basin acreage and maintains steady oil volumes through 2021, just like many other leading players in the industry.
In line with this, Diamondback sold some of its water assets to its midstream affiliate, Rattler Midstream LP, in a recent drop-down deal, taking advantage of a strong A&D (acquisition and divestitures) market. Most of the divested assets the company had acquired through its acquisitions of QEP Resources and Guidon Operating earlier in the year.
Besides this motion, the company had already sold its Williston Basin assets for more than $800 million back in May 2021.
And now Diamondback was able to win $160 million more out of Rattler, seeing as the affiliate had already agreed to acquire its produced water gathering and disposal infrastructure, produced water recycling facilities, and source water gathering and storage.
Rattler and Diamondback also agreed to add certain Diamondback leasehold acreage to Rattler's commitment of produced water collection and disposal services as part of the amendment announced on October 21.
According to the arrangement of the drop-down deal, Rattler will make use of its cash on hand and borrowings under its revolving credit facility to fund the transaction, which is expected to close during the fourth quarter.
As for Rattler Midstream itself, Diamondback Energy formed it as a growth-oriented Delaware limited partnership in July 2018 in order to own, operate, develop and acquire midstream infrastructure assets in the Midland and Delaware basins of the Permian Basin.
And through its joint venture with a private affiliate of an investment fund, it recently acquired a majority stake in a gas gathering and processing company in the Midland Basin from West Texas Gas Inc.
As for the transaction at hand, Raymond James & Associates Inc. and Hunton Andrews Kurth LLP are providing financial and legal advice to the conflicts committee of Rattler's board of directors.
Ain't Nothing Like a $2 Billion Deal: Oasis Sells Midstream Affiliate to Crestwood
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Crestwood & Oasis Midstream merge to create a top Williston #basin player. $1.8 billion deal is expected to close during the Q1 of 2022. The transaction will result in a 21.7% ownership stake for Oasis in Crestwood common units. The remaining ownership of Oasis in Crestwood will also be of benefit to the company since it will create a diversified midstream operator with a strong balance sheet and a bullish outlook after this accretive merger.
Pivot to the South: LNG Plants Under Development by Sempra Energy in Louisiana and Mexico
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Sempra Energy would develop the 4.0-mmtpa Vista Pacifico LNG export facility located next to the company's Terminal for Refined Products in Topolobampo in a bid to provide gas from the Permian basin in Texas and New Mexico to Asian markets. Once marketing begins, Sempra's management expects Vista Pacifico to be oversubscribed.
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Shareholder’s payout target was increased by 50% after the largest U.S. independent oil producer surpassed Wall Street’s earnings estimates on growing energy prices, said Houston-based Conoco Phillips Co. on Aug. 4. Due to Western sanctions on major producer Russia throttling energy supply amid a rebound in demand from pandemic lows, oil and gas #prices have soared. Crude has been trading more than 25% higher since the start of the year and results also benefited from high natural gas prices. Meanwhile, shares were down a fraction, to $91.03, in early trading but are up about 26% year to date. Conoco Phillips stated, that the average price obtained for a barrel of oil and gas accelerated 77% from a year earlier to $88.57. The company acknowledges that it has not hedged any of its oil and gas sales to make the most of higher market prices. The capacity of 1.69 million boe/d was in line with Wall Street estimates, however, the company expected the current quarter’s output would be between 1.71 million and 1.76 million boe/d.
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California oil joint venture, Aera Energy, of Exxon Mobil Corp. and ShellPlc is being sold to German asset manager IKAV, according to the agreement of Sept. 1. Shell noted that the sale of its 51.8% membership interest in Aera Energy is for a total consideration of about $2 billion in cash with additional contingent payments based on future oil prices, subject to regulatory approval. However, the total transaction value was not disclosed. Being one of California’s largest oil and gas producers, Aera Energy accounts for nearly 25% of the state’s production. The sale by Exxon Mobil and Shell ends a 25-year-long partnership in California, meanwhile, it persists a streak of divestments of mature oil and gas properties by the two supermajors. Aera Energy LLC operates about 13,000 wells in the San Joaquin Valley in California, producing oil and associated gas. In 2021, Aera took out about 95,000 boe/d. Exxon Mobil’s interests in the Aera oil-production operation in California contained a 48.2% share of Aera Energy LLC and a 50% share of Aera Energy Services Co. held by Mobil California Exploration & Producing Co. Moreover, Exxon Mobil affiliates have signed a separate agreement for the sale of an associated loading facility and pipeline system. The sale effectively ends Shell’s upstream position in California. The company reported that the divestiture is valued to result in a post-tax impairment of $300 million to $400 million, subject to adjustments.
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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.