Oil-rich Permian Basin attracts buyers with resources
Oil-rich Permian Basin attracts buyers with resources
2023 was a big year for the U.S. oil and natural gas business. The country remained the world’s largest oil producer for the sixth straight year, and a wave of consolidation swept through the industry. A good chunk of that merger and acquisition activity was concentrated in the Permian Basin of West Texas and New Mexico, which has been helping the U.S. hold on to the world’s top spot.
The Permian Basin produced nearly 6 million barrels of oil a day in 2023. That’s more than Iraq, the United Arab Emirates or Kuwait, according to Peter McNally, analyst at Third Bridge.
“This year was another new high, you know, for the Permian. And that has attracted a lot of interest,” he said.
The Permian Basin has another thing going for it. “It’s almost like real estate: location, location, location,” said Robert McNally of consulting firm Rapidan Energy.
Industry-friendly regulation in Texas is part of that. There’s also less federal regulation when it comes to exporting the oil because it doesn’t have to cross state lines.
“Because Permian oil tends to be exported rather than used in our own refineries, the Permian is very important because it’s very close to our major export terminals,” Robert McNally said.
The biggest energy deal in the Permian last year took place in October, when ExxonMobil bought Pioneer Natural Resources for $60 billion worth of stock. But there’s been plenty of other FOMO-fueled deal-making in the Permian — a rush to buy assets while they’re still available, said Andrew Dittmar at Enverus Intelligence Research.
“Scarcity or perceived scarcity in the market is a major driver of these deals,” he said.
About a decade ago, Dittmar said, private-equity firms piled into the Permian. “They had inventory. The public companies wanted inventory,” he said. “And so it was a good marriage of needs and wants between private sellers and public buyers.”
But the deal-making may have reached a turning point last month, when Occidental Petroleum bought privately held CrownRock for around $12 billion. Shopping in the Permian, Dittmar said, is getting expensive.
“It does feel like we’re kind of approaching a top in terms of what companies can reasonably pay for these assets and inventory in the Permian Basin,” he said.
Dittmar expects natural gas to play a bigger role there. With sanctions on Russian gas exports, there’s need all over the world.
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