To say we’re feeling a trend here would be an understatement. Over the last couple of years, there has been an absolute frenzy of producer M&A activity in the Permian, much of it involving large E&P companies getting bigger and private equity taking advantage of assets they have been developing since the 2010s. The latest multibillion-dollar deal includes Ovintiv’s recently announced plan to acquire the Midland Basin assets of three producers backed by EnCap Investments will nearly double Ovintiv’s oil and condensate production in west Texas, will reduce its production costs per barrel and add more than 1,000 well locations to its inventory. Oh, and in a separate but related deal, Ovintiv will exit the Bakken by selling its assets there to another EnCap subsidiary. In today’s RBN blog, we take a look at what the M&A artist formerly known as Encana is up to.
In Prince’s 1984 smash hit, “Let’s Go Crazy,” he says, “If the elevator tries to knock you down, go crazy, hit a higher floor.” We’re pretty sure he wasn’t urging E&Ps to improve their portfolios through M&A, but he might as well have been. The upheavals of the early 2020s—a pandemic, a push to decarbonize, a ground war in Europe, rising interest rates and a banking crisis, to name a few—and the new financial discipline of producers have spurred what you might call The Great Reshuffling. with large E&Ps building scale and inventory in what they consider their most promising and profitable plays and, in many cases, exiting plays whose prospects are deemed less favorable.
As we said more than a year ago Buy, buy, buyThe upstream oil and gas sector is in the midst of the most impactful wave of corporate consolidation since the turn of the century: ConocoPhillips acquires Concho Resources, Chevron buys Noble Energy, Cabot Oil & Gas merges with Cimarex Energy to form Coterra Energy and Pioneer Natural Resources devouring the energy of parsley i DoublePoint Energy. Since then, we’ve returned again and again to the story of growth through acquisitions, which often had a Permian angle. In baby i 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 (open your wings)followed by reviews of FireBird Energy and Diamondback Energy’s Lario Permian acquisitions (West Texas in my eye) and Matador Resources’ planned purchase of Advance Energy Partners (Harder better faster stronger).
