The headwinds facing producers in the Permian, the Eagle Ford and other shale plays are trimming the valuations of oil and gas assets and making it easier for deep-pocketed acquirers and private-equity-backed sellers to reach deals. For proof, look no further than the ongoing frenzy of M&A activity in South and West Texas, where large and medium-size E&Ps alike continue to gobble up smaller producers with complementary assets. Their goals are one and the same: increase scale, improve efficiency, cut costs and build inventory in highly productive plays with easy access to Gulf Coast refineries, fractionation plants, and export docks for oil, LNG and NGLs. In today’s RBN blog, we discuss the most significant deals in the Lone Star State so far this spring and what they mean for the acquiring companies.
Sagging hydrocarbon prices, concerns that the best well sites have already been drilled, and prospects for a slowing economy this summer and fall have combined to bring down the valuation of many oil and gas assets in recent months, thereby closing the bid/ask spread and enabling a number of deals to be reached. Just a few weeks ago, in Let’s Go Crazy, we looked at Ovintiv’s $4.275 billion plan to purchase ”substantially all” of the leaseholds and related assets of EnCap Investments’ Black Swan Oil & Gas, PetroLegacy Energy, and Piedra Resources in the Permian’s Midland Basin. The deal, which is expected to close later this month, is a biggie for Ovintiv — it will nearly double the company’s oil and condensate output in West Texas, lower its per-barrel production costs, and add more than 1,000 well locations to its inventory.
And Ovintiv is far from alone in its multibillion-dollar bid to expand its holdings in Texas. As we said more than a year ago in Buy, Buy, Buy, the upstream oil and gas sector is in the midst of the most impactful wave of corporate consolidation in decades, with many of the deals focused on the Permian — for example, ConocoPhillips acquiring Concho Resources, Cabot Oil & Gas merging with Cimarex Energy to form Coterra Energy, and Pioneer Natural Resources buying Parsley Energy and DoublePoint Energy. In Baby, I’m-A Want You, we focused on the half-dozen Permian-related deals that Earthstone Energy completed to expand its role in both the Midland and Delaware basins. Then, in other Permian-related M&A blogs, we looked at Devon Energy’s extensive “portfolio renewal” program (Spread Your Wings), followed by reviews of Diamondback Energy’s bolt-on acquisitions of FireBird Energy and Lario Permian (West Texas in My Eye) and Matador Resources’ April 2022 purchase of Advance Energy Partners (Harder, Better, Faster, Stronger).
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About the song
“What I Like About Texas” was written by Gary P. Nunn and appears as the ninth song on Nunn’s third solo studio album, Home with the Armadillo, released in March 1984. The song, which was released as a single in December 1985, is another treatise of tourism for the state of Texas by Nunn, from mentioning burritos and Lone Star Beer to a geographical tour of several locations in the Lone Star State. Nunn was in fact later designated an Ambassador to the World by Texas Governor Mark White in 1985. His other achievements include a citation from the Oklahoma House of Representatives, an award of appreciation from the city of San Antonio, membership in the Texas Hall of Fame, and being named a musical ambassador for Texas by Texas Governor Rick Perry in 2007.
Nunn is best known as the writer of “London Homesick Blues (Home with the Armadillo),” which was made famous by Jerry Jeff Walker and used as the theme song music for Austin City Limits from 1977 to 2004. Jerry Jeff Walker also recorded “What I Like About Texas” and it appears as the seventh song on his 25th studio album, Viva Luckenbach! released in 1994. Personnel on Nunn’s version of “What I Like About Texas” were: Gary P. Nunn (lead vocals, guitar), Rick Fowler (bass), Tommy Howard (drums), Junior Brown (lead guitar), Herb Steiner (pedal steel guitar), and Sarah K. Woolridge (backing vocals). The album was produced by Michelle Termohlen and Murray Mead.
Gary P. Nunn is an American country music singer-songwriter. He has released six albums with the Lost Gonzo Band and 19 albums as a solo artist. He currently runs an 800-acre cattle ranch in Oklahoma and continues to occasionally perform live.
Jerry Jeff Walker was an American country music singer-songwriter. He released 38 albums and 13 singles. He was known as one of the originators of progressive country music and the outlaw country movement out of Austin, TX. Walker died in October 2020 at the age of 78.
