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XCL Resources Requests FTC Green Light for Purchasing Altamont Energy
03/22/2024
XCL Resources is seeking approval from the Federal Trade Commission (FTC) for its proposed acquisition of Altamont Energy LLC, another Utah-based oil producer. This initiative is backed by XCL's parent entity, EnCap Investments LP, a notable private equity firm. Discussions about purchasing Colorado-based Altamont Energy began in the previous summer, as highlighted in FTC documentation.
For the acquisition to proceed, XCL Resources and its parent company, EnCap Investments, must secure FTC consent. This stipulation originates from a 2022 FTC settlement related to EnCap's acquisition of EP Energy Corp, necessitating the divestiture of EP Energy's Utah operations as part of the settlement's terms.
The companies argue that the acquisition of Altamont Energy would not disrupt the competitive dynamics within the waxy crude oil market. Instead, the acquisition aims to bolster Altamont Energy, which is smaller than XCL Resources, by providing it with the capital required for expansion and development.
Both XCL Resources and Altamont Energy have significant operations within Duchesne and Uintah counties in Utah, with ownership and operation of oil wells and land assets. According to the most recent data, XCL Resources produced approximately 1.57 million barrels of oil in December 2023, translating to an average daily production of over 50,000 barrels. For the entire year, the average daily production was around 44,860 barrels. In comparison, Altamont Energy's production for December 2023 was 109,349 barrels, equating to approximately 3,527 barrels per day, with an annual average production of 4,052 barrels per day.
As of the last reporting period, Altamont Energy operated 66 active wells in Utah. XCL Resources reported managing 135 horizontal wells across approximately 45,900 net acres in Utah. The company maintains an active drilling program in the Uinta Basin, averaging the completion of about 70 new wells annually.
Altamont Energy's drilling efforts are concentrated on exploiting the Wasatch and Green River formations within the Uinta Basin, where it successfully brought eight new horizontal wells into production last year.
Competition in Uinta Basin
In August, XCL Resources started talks to buy another company called Altamont Energy. This happened after Altamont hired a company named Houlihan Lokey to help sell its business, which involves producing a type of oil called waxy crude. This is all mentioned in a document they sent to the FTC, which is a government agency that checks if companies can merge or not.
Altamont looked for a buyer by reaching out to over 300 potential ones. Out of all of them, XCL Resources offered the best deal and was chosen to buy Altamont.
XCL Resources explained to the FTC why it's a good fit to buy Altamont. One reason is that XCL already owns land next to Altamont's land in two places called Duchesne and Uintah counties. They think by joining forces, they can work more efficiently.
Altamont doesn't have the equipment to drill new wells and doesn't have plans to grow because it doesn't have enough money. XCL, on the other hand, is known for being good at running its operations without spending a lot of money in the same area, the Uinta Basin. By coming together, they believe they can save money on things like dealing with water, gas, and the process of drilling and completing wells.
The FTC once looked into a deal involving XCL's parent company and another company because they were worried it might lead to fewer choices and higher prices for a type of oil in the Uinta Basin, which could affect refineries around Salt Lake City. However, there's now so much oil being produced there that the refineries have more than they need. This means the refineries can set the prices, not the oil producers like before.
XCL also says there are more companies now drilling for oil in the Uinta Basin, making it a competitive place. In the last two years, new companies like Scout Energy Partners, Wasatch Energy Management Operating, Anschutz Corp., and Vaquero Energy have started working there. Plus, some companies that had stopped working in the area are now active again, like Berry Corp., Caerus Uinta, and KGH Operating. This makes the oil market there even more competitive.
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