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Permian Basin Power: OXY Seeks Buyers for Delaware Assets, Permian Resources and Continental Resources

Recently, the Permian has seen significant acquisitions:

Exxon Mobil purchased Pioneer Natural Resources for about $60 billion.
Diamondback Energy's $26 billion deal to acquire Endeavor Energy Resources is currently on hold due to requests from the U.S. Federal Trade Commission.
Occidental’s acquisition of CrownRock for $12 billion in the Midland.

E&Ps like Permian Resources, Civitas Resources, Ovintiv Inc., Vital Energy, and Matador Resources expanded their Permian operations through mergers and acquisitions last year.

After a range of big deals in the Permian Basin, finding top-quality drilling sites is getting tougher. Still, experts believe valuable opportunities are left, especially for those willing to invest.

In 2023, the U.S. oil and gas sector saw M&A hit $192 billion, with many of these deals happening in the Permian Basin, America's top oil-producing area. This trend of active dealmaking has continued into the first half of 2024. Companies are on the lookout for drilling sites in the Permian where production costs can be kept under $50 per barrel.

For example, Occidental Petroleum is taking on more debt to buy CrownRock LP for $12 billion. To help manage this debt, Occidental plans to sell up to $6 billion in non-essential U.S. assets. It has already started selling assets in the Permian Basin.

Right now, OXY is looking to sell its holdings in the southern Delaware Basin, particularly in the Barilla Draw area of Reeves County, Texas. These assets might sell for over $1 billion. To help with the sale, Occidental is working with a financial adviser to find buyers.

Several aggressive oil and gas producers (E&Ps) are expanding their presence in the southern Delaware part of the Permian Basin. Permian Resources, for example, significantly increased its Delaware footprint with a $4.5 billion acquisition of Earthstone Energy last year and now holds a major position in the area.

Continental Resources, owned by Harold Hamm, a well-known figure in the oil industry, also has a significant presence here. They entered southern Delaware with a $3.25 billion purchase from Pioneer Natural Resources in late 2021. Continental has been acquiring more leases in the Midland Basin, including lands and assets that were once part of Occidental, as per records from the Texas Railroad Commission. In its latest annual report, Occidental reported a net gain of $142 million from selling some non-core Permian properties.

Other large E&Ps like Devon Energy, EOG Resources, and ConocoPhillips also have substantial operations in the region.

Occidental's assets in southern Delaware could attract buyers interested in strengthening their position in the area. The current M&A cycle may see less activity in the divestiture market. Investors and analysts are primarily focused on the quality of inventory right now, favoring companies with rich drilling inventories that command higher market values.

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TOP 2022 vs 2023 Permian Producers Overview by Rextag

The Permian Basin, America's prime oil region, faced significant challenges during the COVID-19 pandemic. The industry saw a drastic reduction in rigs and fracking crews and had to close some operations as oil prices plummeted, leading to widespread restructuring. Now, the Permian is making a strong comeback. Over the last three years, exploration and production companies (E&Ps) have increased their drilling activities. They're focusing on spending wisely and maximizing returns to their investors. The Permian's role is crucial. It was projected to contribute over 5.98 million barrels of oil per day in December, making up about 62% of the total oil production in the Lower 48 states, as per the EIA.

Occidental Petroleum is expanding its reach in the Midland Basin and targeting deeper drilling in the Barnett area through its significant $12 billion purchase of CrownRock LP. CrownRock, a collaboration between CrownQuest Operating LLC and Lime Rock Partners, is recognized for its prime land holdings in the Permian Basin. This acquisition brings over 94,000 net acres and 1,700 undeveloped drilling spots in the Midland Basin to Occidental's portfolio.

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