The US Permian basin underlined its status as a hot spot for acquisitions as 2021 came to a close, with Earthstone Energy acquiring the assets of privately-held Chisholm Energy for approximately $604 million.
Earthstone said in a statement it would finance the deal with $340 million in cash at closing, plus $70 million in deferred cash over the next 12 months and 19.4 million shares of its Class A common stock valued at $194 million.
The deal is expected to close in the first quarter of 2022.
The 36,100 net acres to be acquired by Earthstone are part of the northern Delaware basin, a productive unconventional play, located in the Eddy and Lea counties in New Mexico.
Current net production of the acreage is approximately 13,500 barrels of oil equivalent per day, of which 79% are liquids. Earthstone said it would be acquiring 414 gross and 237 net operated identified drilling locations in the basin.
The company estimates the newly purchased acreage has proven developed reserves of approximately 25.8 million barrels of oil equivalent.
While merger and acquisition activity has increased in the US over the past two years, no region has been busier than the Permian.
The basin reported $30 billion in transactions in the second and third quarters of 2021, with $18 billion alone from July to September. The major move was ConocoPhillips acquiring all of Shell’s assets for about $9.5 billion.
That was ConocoPhillips’ second major acquisition within a year’s time, as the company had purchased independent Concho Resources for approximately $13.3 billion in the fourth quarter of 2020.
In July 2020, Chevron acquired Noble Energy, another independent with a strong position in the Permian, for $13 billion.
Independent producers also have made significant moves to expand their positions in the Permian.
Pioneer Natural Resources, the largest oil producer in the basin, acquired Parsley Energy for $7.6 billion in late 2020 and DoublePoint Energy for $4.6 billion in April 2021.
Fellow independent Diamondback Energy acquired QEP and privately-held Guidon Operating for more than $3 billion. The all-stock transaction for QEP was valued at around $2.2 billion, while the deal for Guidon was worth approximately $862 million.