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Who's Next after Diamondback? Potential Takeover Targets in the Permian Basin
02/15/2024
FRESH NEWS: The $26 billion purchase of Endeavor Energy Resources by Diamondback Energy, with its stock up 2.6%, is the newest big deal combining oil and gas production in the Permian Basin under a few big companies (more details here). This leads to a big question: who's next to be bought out?
Before diving into here’s a handy list from Rextag’s Energy DataLink of the 10 top Upstream Operators in the Permian Basin:
# |
Company |
Oil (Mbbl) |
Gas (Mbbl) |
BOE (Mbbl) |
Producing Wells |
1 |
Pioneer Natural Resources USA, Inc. |
1090.18 |
2991.02 |
1588.69 |
10,471 |
2 |
COG Operating, LLC |
840.57 |
2893.77 |
1322.86 |
9,353 |
3 |
EOG Resources, Inc. |
694.81 |
2814.40 |
1163.88 |
5,026 |
4 |
Apache Corporation |
462.89 |
2689.47 |
911.13 |
11,692 |
5 |
XTO Energy, Inc. |
567.02 |
2057.94 |
910.01 |
6,321 |
6 |
Chevron USA, Inc. |
469.69 |
2211.90 |
838.34 |
7,007 |
7 |
Diamondback E&P, LLC |
551.92 |
1513.68 |
804.20 |
7,104 |
8 |
WPX Energy Permian, LLC |
405.27 |
2013.32 |
740.82 |
1,223 |
9 |
Occidental Permian, Ltd. |
571.03 |
921.14 |
724.55 |
8,648 |
10 |
Cimarex Energy Company |
325.96 |
2388.81 |
724.10 |
2,529 |
Rextag`s table showing Top 10 Permian Basin Upstream Operators as of February 2024
Ovintiv
Ovintiv, which used to be called Encana and has seen its stock increase by 0.8%, has changed a lot in the last 10-12 years. It's a company with a wide range of assets in both the US and Canada, making any deal more complex than one focused solely on the Permian Basin. However, with control over more than 200,000 barrels of oil equivalent per day in the Permian, it remains a desirable acquisition for many potential buyers.
Coterra Energy
Coterra Energy was created in 2021 by merging Cimarex and Cabot Oil & Gas, which boosted its stock by 16%. Coterra has a mix of assets not just in the Permian, but also in the Marcellus Shale and Anadarko Basin. A buyout from a big company like Chevron or ConocoPhillips, both seeing a 0.3% stock increase, would be more complex due to Coterra's diverse holdings, especially in gas. This could mean selling off some parts of the business after the buyout, unlike ExxonMobil's simpler deal buying Pioneer Natural Resources, focused only on the Permian.
EOG
EOG, a major independent producer with a significant presence in the Permian Basin, often goes unnoticed in acquisition talks. Its diverse asset portfolio, spanning beyond the Permian to include the Marcellus, Haynesville, and DJ Basins, has made it a less appealing target recently. Companies have been looking for deals that strengthen their Permian holdings or expand into other key areas.
EOG's operations cover a wide range of locations. It has a large operation in the Permian (over 660k barrels of oil equivalent per day) and is active in the Bakken Shale, DJ Basin, Powder River Basin in Wyoming, Anadarko Basin, Barnett Shale, Eagle Ford Shale, and Utica Basin in the Northeast, along with international assets.
Devon Energy
Devon Energy, headquartered in Oklahoma City and showing a slight stock decrease of 0.1%, is another longstanding independent oil producer that rarely comes up in acquisition talks, similar to EOG. However, with its substantial Permian production of 478,000 barrels of oil equivalent per day, Devon represents a significant opportunity for larger companies aiming to boost their presence in the Permian Basin.
While Devon, like EOG, has operations across various U.S. shale regions, it would likely be a simpler acquisition target compared to its Houston-based counterpart. Recent rumors have swirled about Devon being in discussions to buy EnerPlus, a move that would not only expand its assets into the Marcellus shale but also strengthen its Bakken shale operations.
The complexity of their asset portfolios is one reason these two well-established growth-focused independents are not often seen as potential takeover candidates.
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The essence of the recent wave of shale consolidation has been relatively straightforward transactions, focusing on targets with assets in just one basin. Deals have been particularly appealing when the target's assets closely align with the buyer's existing operations in the same area, much like ExxonMobil's acquisition of Pioneer.
Such transactions are preferable because they're easier to integrate, offer significant cost savings, and minimize the need for selling off less essential assets. However, opportunities for these kinds of straightforward, large-scale deals in the Permian Basin are becoming scarce.
When companies like EOG and Devon Energy begin to divest from certain areas to streamline their asset portfolios, it suggests they're potentially preparing for acquisition by making their operations more attractive to buyers.
This suggests that while there are still deals to be made, the scale and impact of upstream mergers and acquisitions in 2024 might not match the levels seen in 2023.
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.
Bakken's Tipping Point: Grayson Mill's Potential Fall After Chevron-Hess
The Permian Basin, a big oil area, is not seeing as many deals as before because lots of companies have already joined together. Now, experts think these companies might start looking for new places to invest in the U.S. One area getting attention is the Bakken play. Chevron Corp. has just made a big step there by buying Hess Corp. for $60 billion. Another company, Grayson Mill Energy, which got some help from a Houston investment firm EnCap Investments LP, might also be up for sale soon, worth about $5 billion.
Occidental, CrownRock Merger Under Regulatory Review: 2024 Update
CrownRock's 94,000+ net acres acquisition complements Occidental's Midland Basin operations, valued at $12.0 billion. This expansion enhances Occidental's Midland Basin-scale and upgrades its Permian Basin portfolio with ready-to-develop, low-cost assets. The deal is set to add around 170 thousand barrels of oil equivalent per day in 2024, with high-margin, sustainable production.
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.
The Williston Basin is a big area filled with layers of rock that sits next to the Rocky Mountains in western North Dakota, eastern Montana, and the southern part of Saskatchewan in Canada. This area covers roughly 110,000 square miles. Geologically, it's very similar to the Alberta Basin in Canada. People started drilling for oil in the Williston Basin back in 1936, and by 1954, most of the land where oil could likely be found was already claimed for drilling. The Bakken Formation with parts of Montana, North Dakota, Saskatchewan, and Manitoba has become one of only ten oil fields globally to yield over 1 million barrels per day (bpd) since the late 2000s. It is currently the third-largest U.S. shale oilfield, behind the Permian and Eagle Ford. The boom in the Bakken started around September 2008, coinciding with the U.S. housing market crash. The application of new technologies, such as swell packers enabling multiple-stage fracturing, significantly enhanced oil recovery, making the Bakken Formation a key player in the U.S. In 2022, the Bakken oil field saw big improvements in how much oil and gas it could produce. At the start of the year, 27 drilling rigs were working there, more than double the 11 rigs from the start of 2021. Important upgrades included making the Tioga Gas Plant able to process 150 million cubic feet more gas each day, and making the Dakota Access Pipeline bigger, increasing its oil transport capacity from 570,000 to 750,000 barrels every day.