Movers and Shakers in the Permian Basin

Companies come and go for all types of reasons: mergers, acquisitions, bankruptcy, etc. This is proving especially true for the first two types with the prosperity of the Permian Basin.

The Permian Basin is a large sedimentary basin 250 miles wide and 300 miles long located in west Texas and southeast New Mexico. This basin consists of three sub-basins: the Midland is the largest followed by the Delaware then the Marfa. Several reservoirs (Wolfcamp, Bone Spring, Sprayberry, Yates, San Andres, etc.) exist within these sub-basins. Watch this video by Thomas E Ewing on the history of the Permian Basin to get a better understanding of its potential:

Occidental Petroleum is the largest land holder within the Permian Basin. Chevron is the second largest.

Pioneer Natural Resources (PNR) is the biggest oil producer in Texas looking to spend up to $4.75 billion in 2023 on drilling, completions, facilities and water infrastructure. PNR is also the largest acreage holder in the Permian Basin. Annual revenue for 2022 was $24.29B.

Rumors are being reported by the Wall Street Journal and Forbes that ExxonMobil is interested in buying or merging with PNR. Exxon has been open about being aggressive in the Permian. The combination of the two companies would create a mega giant with both an asset base and numerous drilling locations.

In 2021 PNR bought Parsley Energy and DoublePoint Energy increasing their holdings in the Permian. XTO Energy merged with ExxonMobil in 2010 in a deal valued at $41 billion.  XTO’s natural gas experience and expertise attracted ExxonMobil to the deal.

As rumors increase on a possible merger, will ExxonMobil sweeten the deal to merge with Pioneer Natural Resources or will PNR decline?

Another purchase is taking place: Ovintiv Inc is buying oil exploration and production assets controlled by EnCap Investments, a private equity firm, for about $4.3 billion including debt. These assets are owned by three companies: Black Swan Oil & Gas, Piedra Resources and PetroLegacy II. The company already was going to spend more money drilling this year so this will increase their presence in the Midland Basin. This is a cash, $3.125 billion, deal with some stock, 32.6 billion shares. As of 04.05.23, negotiations were still taking place. The last acquisition made by Ovintiv was in 2019 for $5.5 billion in stock. This purchase will expand Ovintiv’s portfolio by 65,000 acres.

On the market: Diamondback is selling its non-core assets in the western Permian Basin. The company is worth just under $27 billion. They are targeting a sales price of $1 billion for these assets.

Another possible sale: NCP Energy Capital Management is hoping to sell two oil producers, Top Rock Resources and Hibernia Resources, for more than $7 billion. Top Rock is valued around $5 billion, and Hibernia is valued over $2 billion. These two companies have assets in the Delaware and Midland respectively.

Since OPEC+, a group of 23 oil-exporting countries which meets regularly to decide how much crude oil will be sold on the world market, is slashing oil production of 1.16 million barrels per day oil prices will only continue to rise. With rising oil prices companies’ profitability will increase. Whether you are a buyer, or a seller, now is the time to look at the Permian Basin.

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