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Permian Resources Corp. has completed its purchase of Delaware Basin acreage and midstream infrastructure from Occidental Petroleum Corp. for about $818 million.
The transaction between the Texas-based companies includes around 27,500 net acres on the Texas side of the Permian sub-basin and approximately 2,000 net acres on the New Mexico side. These are expected to add 15,000 barrels of oil equivalent a day (boed) to Permian Resources’ production in the fourth quarter of 2024.
Additionally, the transaction gave Permian Resources “~9,900 net royalty acres and substantial midstream infrastructure primarily located offset the Company’s existing position in Reeves County, Texas”, it said in a statement.
The new acreage adds over 200 operated, two-mile locations gross “with high NRIs, which immediately compete for capital”, according to Permian Resources’ announcement of the deal July 29.
The infrastructure portion of the agreement includes more than 100 miles of oil and natural gas pipelines and a water system with a water recycling capacity of approximately 25,000 barrels per day.
“This acquisition is a natural fit for us given its high-return inventory and proximity to our current operated position”, co-chief executive Will Hickey said then. “As the Delaware Basin’s low-cost leader, we are highly confident that our team will be able to leverage its operational expertise of the asset to significantly reduce costs and drive meaningful synergies, maximizing value for our shareholders”.
Permian Resources said at the time, “The transaction is attractively valued at approximately 3.4x 2025E EBITDAX and 17 percent free cash flow yield, assuming a maintenance production profile and $75 per Bbl / $3.00 per MMBtu [million British thermal unit] flat pricing”.
“The acquisition is expected to be accretive to all key per-share metrics, including cash flow, free cash flow and net asset value per share”, it said. “The Company expects the transaction to deliver accretion to free cash flow per share of over 5 percent per year during the next two, five and ten-year periods. This is consistent with the Company’s disciplined acquisition strategy, pursuing transactions which provide significant accretion to all relevant per share metrics over the long-term”.
“Permian Resources anticipates that the financing of the acquisition will be leverage neutral on a forward-looking and pro forma basis, allowing the Company to maintain a strong balance sheet with an expected year-end 2024 pro forma net debt-to-EBITDAX ratio of approximately 1x on a last quarter annualized basis, assuming strip prices”, the company added.
Occidental Divestments
For Occidental, the divestment helps it keep debt manageable following the Warren Buffett-backed company’s $12.4 billion cash-and-stock takeover of Permian Basin competitor CrownRock LP. It has tapped into further external financing to fund the purchase, which is expected to grow its lease area by 94,000 acres and add an average of 170,000 boed to its 2024 output.
The oil, gas and chemicals producer launched a $4.5 billion-$6 billion divestiture program when it announced the CrownRock merger late last year.
Occidental said last month it had reduced its principal debt by $3 billion during the third quarter, using proceeds from asset sales and organic cash flow.
“We are pleased with the rapid and significant progress of our deleveraging program along with enhancements made to our already premier portfolio”, president and chief executive Vicki Hollub said in a company statement August 19. “By the end of the third quarter, we expect to achieve nearly 85 percent of our near-term $4.5 billion debt reduction commitment”.
Occidental plans to fulfill that commitment within 12 months from the closing of the CrownRock acquisition. It announced the closing of the purchase August 1.
In its quarterly report August 7, Occidental confirmed new debt consisting of term loans due 2025 and 2026 with a combined principal amount of $4.7 billion and senior unsecured notes due 2027, 2029, 2032, 2034 and 2054 with a total principal amount of $5 billion.
Also last month Occidental raised $700 million from the sale of 19.5 million common shares representing limited partner interests in Western Midstream Partners LP and signed an underwriting agreement for a secondary offering consisting of 100 percent of the stock portion of the CrownRock acquisition, or nearly 29.6 million shares.
As of June Occidental had $9.7 billion in current liabilities including $1.3 billion in current maturities.
To contact the author, email jov.onsat@rigzone.com
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