Multibillion-dollar mergers and acquisitions have attracted a lot of attention the past couple of years. Chevron buys Noble. ConocoPhillips acquires Concho. Cabot merges with Cimarex. Pioneer adds Parsley and DoublePoint. While it’s understandable that these mega-deals grab the spotlight, they tend to overshadow the many smaller-but-still-substantial agreements being announced at a rapid pace over the same period. Many of these less-than-$4-billion deals involve crude-oil-focused producers expanding their holdings in basins where they were already active, and many — no surprise — are happening in the Permian, although acreage in the Denver-Julesburg and the Eagle Ford are in play as well. In today’s RBN blog, we look at a few of the more interesting small and midsize acquisitions announced recently.
As we said last month in Buy Buy Buy, the period since the COVID-related meltdown in crude oil prices in April 2020 has been marked by the most impactful wave of corporate consolidation among E&Ps since the turn of the century, when a plunge in oil prices spurred deals that helped to form many of today’s supermajors and large independents. The last round of big-ticket M&As isn’t about getting bigger for bigness’s sake. Instead, the common goals among the acquiring E&Ps have been to boost their inventories of high-margin assets, accelerate free cash flow generation, and grow shareholder returns while slashing capital and corporate expenditures.
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The same could be said about many of the deals involving smaller E&Ps that have been announced since COVID reared its ugly head. These small-to-midsize deals are a mixed bag — some are mergers, some are acquisitions of entire companies, and others call for the purchase of specific production assets or groups of assets of particular interest to their buyers. In many cases, participants are seeking to combine acreage with complementary footprints that will allow for longer lateral drilling, more efficient operations, and enhanced production capacity that would be difficult to achieve independently.
One of the most aggressive among these buyers is Earthstone Energy, a publicly held independent oil and gas producer that has announced five acquisitions totaling more than $1.8 billion since December 2020, all involving acreage and production in the Permian, with most of the assets concentrated in the southern Midland Basin (see Figure 1). Before Earthstone started its buying spree, its production averaged about 15,400 barrels of oil equivalent per day (15.4 Mboe/d). Taken together, we expect the five acquisitions to increase the company’s output by about 500% –– to north of 90 Mboe/d, on average, once the last of the deals closes in the second quarter of 2022.
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About the song
“Baby I’m-A Want You” was written by David Gates and appears as the second song on side one of Bread’s fourth studio album of the same title. Released as a single in October 1971, the song went to #1 on the Billboard Adult Contemporary chart and #3 on the Billboard Hot 100. It has been certified Gold by the Recording Industry Association of America. The soft rock hit has been covered by many artists, including Aaron Neville, Engelbert Humperdinck, and Wayne Newton. Personnel on the record were: David Gates (lead vocals, guitar, bass, synthesizer), James Griffin (backing vocals, guitar, piano), Larry Knechtel (keyboards), and Mike Botts (drums, percussion).
The album Baby I'm-A Want You was recorded at Sound Recorders and Sound Labs in Los Angeles during 1971. Produced by Gates, it was released in January 1972. It went to #3 on the Billboard 200 Albums chart and has been certified Gold by the RIAA. Three singles were released from the LP.
Bread was an American soft rock band formed in Los Angeles in 1968 by David Gates, James Griffin, Robb Royer and Mike Botts. Larry Knechtel replaced Royer in 1971. They released six studio albums, 12 compilation albums, and 16 singles. The group disbanded for the first time in 1973, with Gates and Griffin pursuing solo careers. The band reunited in 1976, releasing an album and touring through 1977 before breaking up again. In 1996 they reunited for a 25th Anniversary Tour that lasted until 1997. It would be the final time the band would perform together. Griffin and Botts died in 2005 and Knechtel in 2009. Royer lives in the U.S. Virgin Islands and continues to write. Gates retired from the music business and lives in Washington state with his wife Jo Rita, who was the subject of his first record, “Jo-Baby,” which was released as a single in 1958 by David Gates and The Accents while Gates was still residing in Tulsa.
