Permian Resources has announced the acquisition of Occidental Petroleum’s Barilla Draw asset and additional New Mexico acreage for $818 million. This strategic move is set to add 15,000 barrels of oil equivalent per day to Permian Resources’ production base. The acquisition includes 29,500 net acres, 9,900 net royalty acres, and associated midstream assets, enhancing the company’s operational footprint. With over 200 new operated locations, this deal promises significant competitive capital opportunities and financial growth for Permian Resources.
Here’s a detailed summary of Permian Resources’ acquisition of Occidental Petroleum’s Barilla Draw asset and additional New Mexico acreage:
Acquisition Details:
- Cost: $818 million.
- Assets Acquired:
- Barilla Draw asset.
- Additional New Mexico acreage.
- 29,500 net acres.
- 9,900 net royalty acres.
- Associated midstream assets.
- Production Increase: 15,000 barrels of oil equivalent per day (boe/d).
Inventory and Production:
- Contribution: Over 200 operated locations, expected to compete for capital.
Financial Metrics:
- Deal Valuation: Priced at 3.4x 2025E EBITDA.
Strategic Fit and Benefits:
- Competitive Inventory: The acquired inventory is expected to compete favorably with current drilling opportunities.
- Improved Breakeven Pricing: Due to supporting midstream infrastructure and higher-than-average net revenue interest from the ownership of the royalty acreage.
- Operational Synergies: Expected cost reductions and operational efficiencies.
Market Outlook:
- M&A Trends: Reflects a trend where large, core acquisition opportunities are becoming rare.
- Non-Core Asset Acquisitions: Companies might increasingly acquire non-core assets from major sellers like Occidental.
- Private Equity Opportunities: Favorable outlook for private equity investors to sell remaining positions, even with limited inventory or locations outside core fairways.
Statements from Co-CEOs:
- Will Hickey: Emphasized the high-return inventory and strategic proximity to existing operations. Confident in leveraging operational expertise to reduce costs and drive synergies.
- James Walter: Highlighted alignment with the strategy of pursuing sound M&A opportunities, adding core inventory accretive to key metrics in the short and long term. Noted the significant flexibility provided by substantial midstream infrastructure and surface acres.
This acquisition marks a significant milestone for Permian Resources, reinforcing their strategic growth and operational efficiency. By integrating Occidental’s assets, Permian Resources is poised to enhance production, reduce costs, and drive synergies, ensuring a strong competitive position in the market. The deal’s favorable financial metrics and strategic fit underscore the company’s commitment to pursuing high-return opportunities. As the industry landscape evolves, Permian Resources is well-positioned to capitalize on future growth and value creation for its stakeholders.
