Through the deal, Permian Resources aims to create a $14bn Delaware Basin independent exploration and production major in which its existing shareholders will own approximately 73% while existing Earthstone Energy’s shareholders will hold around 27% ownership
Earthstone Energy to be acquired by Permian Resources. (Credit: David Thielen on Unsplash)
Permian Resources has agreed to acquire rival Delaware Basin operator Earthstone Energy in an all-stock deal valued at around $4.5bn, inclusive of the latter’s net debt.
Through the deal, Permian Resources aims to create a $14bn Delaware Basin independent exploration and production (E&P) major. The company will add more than 400,000 net acres in the Permian Basin alongside pro forma production of around 300,000 barrels of oil equivalent per day (Boe/d).
In the Delaware Basin, the acquisition adds close to 56,000 net acres of stacked-pay reservoirs, which largely complement the existing acreage of Permian Resources in Lea and Eddy Counties.
The remaining acreage of Earthstone Energy is in the Midland Basin.
Permian Resources, which is listed on the New York Stock Exchange (NYSE), also expects the deal to facilitate an improved free cash flow profile to boost returns to shareholders.
Earthstone Energy is also currently listed on the NYSE. The company had recently acquired the northern Delaware Basin assets of Novo Oil & Gas to add around 11,300 net acres of acreage.
Permian Resources co-CEO Will Hickey said: “Earthstone’s Northern Delaware position brings high-quality acreage with core inventory that immediately competes for capital within our portfolio.
“Additionally, we have identified numerous ways to leverage our deep Delaware Basin experience and incremental scale to improve upon these assets across the board, including approximately $175 million of annual synergies.
“Permian Resources has a proven integration track record, and we believe the successful execution of these cost savings will create incremental value for both Permian Resources and Earthstone stakeholders.”
As per the terms of the deal, each share of Earthstone Energy will be exchanged for 1.446 shares of Permian Resources.
Following the completion of the transaction, current Permian Resources shareholders will hold approximately 73% of the combined entity, while existing Earthstone Energy’s shareholders will hold around 27% ownership.
The deal has been approved unanimously by the boards of both firms. Besides, it is backed by Permian Resources’ and Earthstone Energy’s largest shareholders, which presently own nearly 49% and 48% of each respective company’s shares.
Subject to regulatory approvals, shareholder approvals, and other conditions, the transaction is anticipated to close by the year-end.