Comprehensive Energy Data Intelligence
Information About Energy Companies, Their Assets, Market Deals, Industry Documents and More...
Permian Resources Corp. Newly Established, Acquires Earthstone Energy for $4.5B
09/05/2023
- Strengthens the company's dominant presence in the Delaware Basin while boosting operational scale.
- Integrates valuable assets adjacent to the company's core acreage in New Mexico.
- Aims to realize synergies, leading to an estimated annual cash flow increment of around $175 million.
- Anticipated to bolster free cash flow per share by over 30% annually for the upcoming two years and over 25% annually over the next five to ten years.
Permian Resources to buy Earthstone Energy for $4.5B, focusing on Delaware Basin. Earthstone's Midland Basin assets may be up for sale.
“This is a Delaware Basin company. That’s how we think about the focus going forward,” Permian Resources co-CEO James Walter said.
Deal Details
Permian Resources Corp., formed by merging Centennial Resource Development and Colgate Energy Partners in 2022, is expanding its Permian Basin holdings by 223,000 net acres through a $4.5B acquisition of Earthstone.
The deal boosts the combined firm's total acreage to over 400,000 and adds about 300,000 boe/d production in the Permian.
The acquisition also includes 56,000 acres in the northern Delaware Basin, adjacent to Permian Resources' existing assets.
The acquisition incorporates Earthstone's holdings in the Midland Basin, although Permian Resources plans to focus almost all its capital expenditure on the Delaware Basin. According to co-CEO Will Hickey, the combined company is currently operating 11 drilling rigs across the Permian, with nine specifically in the Delaware Basin.
Long-Term Midland Asset Strategy
- In the short term, Permian Resources will maintain Earthstone's Midland Basin asset for its strong free cash flow.
- The free cash flow from the Midland Basin will be redirected to higher-return Delaware projects.
- Long-term options for the Midland asset are open, but no immediate plans for strategic alternatives.
- Analyst Gabriele Sorbara notes that a potential sale of the Midland assets could be financially beneficial.
- Earthstone is in the process of selling its remaining Eagle Ford acreage in Texas, marking a complete exit from the region.
Expectations
After the merger, Permian Resources plans to relocate at least one of Earthstone's Midland drilling rigs to the Delaware Basin. For the next year, the company aims to allocate 90% of its capital expenditure to Delaware-based projects, focusing specifically on Lea and Eddy counties in New Mexico, as well as Reeves and Ward counties in Texas.
The acquisition will boost Permian Resources' pro forma market capitalization to around $10 billion, surpassing other exploration and production companies like Matador Resources and Civitas Resources.
Once Earthstone divests its remaining Eagle Ford Shale acreage, Permian Resources will rank as the third-largest pure-play Permian E&P, trailing only Pioneer Natural Resources and Diamondback Energy. Private equity asset valuations have increased over the past year, public company mergers and acquisitions are becoming a more appealing way for buyers to scale up, compared to pursuing private equity deals.
If you are looking for more information about energy companies, their assets, and energy deals, please, contact our sales office mapping@hartenergy.com, Tel. 619-349-4970 or SCHEDULE A DEMO to learn how Rextag can help you leverage energy data for your business.
Earthstone Offers Eagle Ford Assets for Sale, Considers Departure from South Texas
Earthstone Energy is selling Eagle Ford locations to concentrate on the Permian Basin, streamlining its exploration and production focus. Earthstone Energy Inc., based in The Woodlands, Texas, is putting an Eagle Ford asset on the market as the company focuses on divesting non-core properties and directing investment towards the Permian Basin. The assets that Earthstone is planning to sell include production and land in northeast Karnes County, Texas, as well as in southern Gonzales County, Texas, as outlined in the marketing documents. For the sales process, Earthstone has engaged Opportune Partners LLC to serve as its exclusive financial adviser.
Diamondback's Viper Energy Acquires $1 Billion in Royalty Interests in the Permian Basin
Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.
OXY has been the leader in Permian Basin production for the past five years. Currently, the Houston-based oil and gas company is deepening its presence in the basin with a $12 billion acquisition of CrownRock, adding over 94,000 acres in the Midland Basin and increasing its oil output by about 170,000 barrels per day. Occidental announced an increase in its proved reserves to 4.0 billion barrels of oil equivalent by the end of December 2023, up from 3.8 billion the previous year. Activities in the Permian largely fueled this rise. Occidental added approximately 303 million barrels through infill development projects as well as new discoveries and the further development of existing fields brought in another 153 million barrels.
TotalEnergies kicked off 2024 with a net income of $5.7 billion in the first quarter, marking a modest 3% increase from the same period last year and a 13% rise from the previous quarter. This growth occurred despite experiencing drops in both the volume and price of gas sales over the year and the quarter. Their adjusted net earnings, which exclude one-time or unusual items, were $5.1 billion. This represents a significant 22% decline compared to last year and a slight 2% drop from the last quarter. The company's earnings before tax, depreciation, and amortization reached $11.5 billion, while their cash flow from operations significantly decreased to $2.2 billion, falling by 58% from last year and a steep 87% from the previous quarter. TotalEnergies also recorded $644 million in impairments.
New Mexico leads the Rockies region in gas production and ranks as the sixth-largest in terms of active gas wells in the U.S. Last year, the state's gas well count slightly increased by 0.2% to 30,699, with new additions in both the northwestern San Juan Basin and the southeastern Permian Basin. Meanwhile, just to the north in Colorado, gas producers grew by a modest 0.1% to 30,322, primarily due to increased drilling activity in the DJ and Piceance basins. Wyoming saw a decline in its active gas wells by 3.7%, down to 17,006, with production mainly in Sublette, Sweetwater, and Converse counties reflecting stable or slightly reduced drilling activity. Utah also experienced a slight decrease of 0.2% in its number of gas wells, totaling 6,463. In Q1 2024, oil and gas industry activity in Oklahoma, Colorado, and northern New Mexico experienced a decline. This marks the fifth consecutive quarter of contraction in drilling and business activities within these regions. According to a survey that included responses from 33 firms operating in the Rockies, this downtrend is expected to continue over the next six months.