Headwinds facing producers in the Permian, Eagle Ford and other shale plays are cutting valuations for oil and gas assets and making it easier for private equity-backed buyers and sellers to strike deals. For proof, look no further than the ongoing frenzy of M&A activity in South and West Texas, where large and mid-sized E&Ps continue to gobble up smaller producers with complementary assets. Their goals are the same: to increase scale, improve efficiency, reduce costs and build inventory in highly productive plays with easy access to Gulf Coast refineries, fractionation plants and oil export docks, LNG and LGN. In today’s RBN blog, we discuss the biggest deals in the Lone Star State so far this spring and what they mean for buyout companies.
Falling hydrocarbon prices, concerns that the best well sites have already been drilled and the prospect of a slowing economy this summer and fall have combined to lower the valuation of many oil and gas assets in the recent months, thus closing the gap between supply and demand and allowing a series of agreements to be reached. Just a few weeks ago, a We’re back Bojos, we looked at Ovintiv’s $4.275 billion plan to buy “substantially all” of EnCap Investments’ Black Swan Oil & Gas, PetroLegacy Energy and Piedra Resources leases and related assets in the Permian’s Midland Basin. The deal, which is expected to close later this month, is a big one for Ovintiv: It will nearly double the company’s oil and condensate production in West Texas, reduce its production costs by barrel and will add over 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 Buy, buy, buyThe 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 by buying Parsley Energy i DoublePoint Energy. 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 the purchase of Advance Energy Partners by Matador Resources in April 2022 (Harder better faster stronger).
