Permian Resources Corporation PR has entered into an agreement to acquire certain Delaware Basin assets from Occidental OXY. The acquired assets include about 27,500 net acres within the Barilla Draw Field of the Texas Delaware basin, in addition to 2,000 net acres in the New Mexico Delaware basin.
The deal, valued at approximately $818 million, is scheduled to be concluded by the end of the third quarter of 2024. The company plans to finance the acquisition through a mix of debt and equity.
The acquired acreage is situated close to Permian Resources’ existing acreage in Texas and New Mexico. Per the company’s statement, the proximity will facilitate the seamless integration of the acquired acreage and enable it to drive meaningful synergies. The combined production from these assets in the fourth quarter is estimated to be 15,000 barrels of oil equivalent per day (boe/d), including 55% oil. The acreage is held 99% by production.
The agreement includes more than 200 operated locations with high net revenue interests. Each of these locations has an average lateral length of 10,000 feet. Permian Resources has highlighted that these resources are expected to immediately compete for investments, with a possibility of initiating development as early as fourth-quarter 2024.
Per the terms of the agreement, Permian Resources will also acquire a fully integrated midstream system in Reeves County, TX. The midstream assets include more than 100 miles of operated oil and gas gathering systems and over 10,000 surface acres.
Furthermore, as part of the deal, PR will gain access to complementary water infrastructure, which involves saltwater disposal wells, a recycling facility, frac ponds and water wells. The midstream infrastructure can fully accommodate Barilla Draw volumes, along with additional capacity for growth.
The midstream infrastructure’s current oil gathering capacity is approximately 70,000 barrels/day, while the current gas gathering capacity is about 190 million cubic feet per day (MMcfd), with a water recycling capacity of 25,000 barrels/day.
Permian Resources stated that the acquisition would be a good fit for the company, given its proximity to the existing acreage. The company plans to utilize its operational expertise of the asset to reduce costs and contribute to meaningful synergies. The acquired assets add to its core inventory and are expected to be accretive to key metrics over both short and long term. The acquired midstream also adds material to the company’s asset base, offering significant future flexibility.
Zacks Rank and Key Picks
Currently, both PR and OXY carry a Zacks Rank #3 (Hold).
Some better-ranked stocks in the energy sector are SM Energy SM and VAALCO Energy EGY. SM Energy presently sports a Zacks Rank #1 (Strong Buy), while VAALCO Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SM Energy is an upstream energy firm operating in the prolific Midland Basin and the South Texas regions. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
VAALCO Energyis an independent energy company involved in upstream operation business with a diversified presence in Africa and Canada. Having a large inventory of drilling locations in premium Canadian Acreage, the company’s production outlook seems bright.
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