“Top-tier rock, massive scale, and ever-improving efficiency” — that’s the mantra of the largest publicly held E&Ps in the Permian, many of which have only added to their heft during the pandemic/post-pandemic era by acquiring complementary production and midstream assets from private equity funds and old-time oil-and-gas families. Yes, it’s either/or time in the U.S.’s leading oil and gas basin: Either you get bigger, high-grade the acreage you control and supercharge your free cash flow (and your stock buybacks and dividends) or you accept your fate as an also-ran or, if you’re lucky, an acquisition target. Just last week, Matador Resources announced a $1.6 billion deal to acquire Advance Energy Partners, which will boost Matador’s Delaware Basin output by 25% and give it a foothold in the Permian’s big-boy league. In today’s RBN blog, we discuss this and other recent asset acquisitions in West Texas and southeastern New Mexico and what they say about the Permian’s future.
A year ago, in Buy, Buy, Buy, we said the upstream oil and gas sector was in the midst of the most impactful wave of corporate consolidation since the turn of the century, when a plunge in oil prices spurred mega-deals that helped to form many of today’s supermajors. Well, the M&A wave that started in mid-2020 may have crested but it’s still rolling in. In 2022, we returned again and again to the growth-through-acquisitions story, which often had a Permian angle. In Baby, I’m-A Want You, we focused on the series of Permian-related deals (five totaling more than $1.8 billion) that Earthstone Energy had completed in 2021 and early 2022 to significantly expand its role in both the Midland and Delaware basins. Last summer, it closed on a sixth: the $627 million acquisition of Titus Oil & Gas assets in the northern Delaware. Then, in Spread Your Wings, we looked at Devon Energy’s extensive “portfolio renewal” program, which last year included a number of major acreage trades in the Delaware that unlocked more than 200 extended-reach drilling locations previously constrained to one-mile developments. (Devon is among the top E&Ps in the Permian, with production averaging 421,000 barrels of oil equivalent per day, or 421 Mboe/d, as of Q3 2022.)
More recently, in West Texas in My Eye, in October, we examined Diamondback Energy’s $1.6 billion, bolt-on purchase of privately owned FireBird Energy. As we said then, FireBird was Diamondback’s fifth 10-figure acquisition since the late 2010s — the deals totaled $15.3 billion and all of them, of course, were in the Permian, where Diamondback is all-in. (As we’ll get to later in this blog, Diamondback has since made a sixth $1 billion-plus acquisition, further securing its place among the Permian’s largest producers.)
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