Oil and gas operators in the Permian Basin continued to consolidate land used to produce fossil fuels, purchasing acreage already in production to drive up returns for investors.
The industry began its consolidation in the wake of the COVID-19 health crisis which saw the price per barrel plummet below $0 per barrel for the first time in history last year, stymying production.
The market recovered this year as COVID-19 vaccines became more widely available and fuel demand grew when travel and business restrictions were lifted.
The Permian saw a resurgence in multi-million-dollar transactions not based on growing production as before but intended to strengthen operators’ presence in the country’s most active oilfield.
Surge Energy announced last week it bought leasing interests and wells from Apache Corporations in Howard County, on the Texas side of the basin, in a $37.5 million deal.
The purchase included about 4,000 net acres, all in production, with about 800 barrels per day of oil production, along with 960 surface acres for saltwater disposal and about 14 drilling locations.
The company, based in Houston, owns about 113,000 acres in the Basin.
Surge Chief Executive Officer Linhua Guan said the move was meant to increase the company’s existing assets in the region.
“This acquisition is consistent with our objective of strategically adding to our portfolio,” Guan said. “Based on the location of this acreage, it allows us to extend laterals from our existing leasehold that should result in increased economics and capital efficiency.”
In nearby Ward County, Texas, the U.S. Energy Development Corporation announced Aug. 11 it had entered a joint venture with Atlantic Energy Partners, based in Midland, to develop three horizontal wells.
The wells targeted the WolfCamp shale on the western side of the Delaware sub-basin of the Permian and were expected to go into service in the first quarter of 2022, with a total development cost of $28 million.
In the last year, U.S. Energy Development closed on $86 million in project and planned another $150 million in the next year, per an Aug. 11 news release.
“This joint venture comes at an ideal time as we expand our footprint in the Permian Basin and the market continues to recover from COVID-19 with the drilling of new wells,” said CEO Jordyn Jason.
Richard Jennings, CEO of Atlantic Energy said the deal will allow his company to continue expanding its operations in the Permian.
“Since 2008, our team has been focused on pursuing opportunities in the Permian Basin of West Texas; specifically, multi-pay Wolfcamp Shale projects which are full of development potential,” he said. “In addition to our own operations, the partnership with U.S. Energy and their ability to execute and operate on task, gives us the ability to accelerate the development of these wells.”
Meanwhile, a Permian-based midstream company acquired another for about $268 million.
NextTier Oilfield Solutions bought out Alamo Pressure Pumping, consolidating the two service companies to save $10 million in annual costs with 6 months of the deal’s closure.
“The acquisition of Alamo accelerates and magnifies the impact of our next generation technology strategy, providing NexTier with significant opportunities for deploying gas-powered equipment and complimentary integrated solutions into a market with high and increasing demand,” said NexTier CEO Robert Drummond.
“Combined, we will operate the third largest base of active hydraulic horsepower across the U.S. and the largest base of next generation equipment in the Permian, improving our scale with highly-utilized fleets for an efficient customer base.”
The series of deals in the Permian came as the region saw a continued uptick in operations as the price per barrel recovered to pre-pandemic levels in mid $60s.
The Chicago Mercantile Exchange reported on Monday the price of domestic crude oil was at $67 per barrel. Monday’s price held steady in the upper $60s range reported throughout August which marked a decline from the mid-$70s seen throughout the previous month.
The summer brought the highest oil prices of the year as the value continued to grow from $48 per barrel reported on Jan 1., climbing to about $65 per barrel by mid-May.
That increase in price led to growth in active oil and gas rigs, an indication that operators were increasing drilling operations in the Permian and showing confidence the markets were improving.
New Mexico had 79 rigs as of Friday, per the latest data from Baker Hughes, after adding four in the last week.
Texas added three rigs in the last week, for a total of 232.
The Permian Basin, which the two state share, had a total of 245 rigs, up two from 243 last week and more than doubling in the last year from 117 rigs.
Source: Current Argus – Photo as posted in Current Argus (Permian Basin oil and gas facilities during a recent field tour with Earthworks, June 9, 2021 in Loco Hills.Adrian Hedden | Carlsbad Current-Argus)