Permian Resources to acquire Reeves County assets from Occidental Petroleum for $817.5m

Permian Resources Corporation has announced a landmark deal to acquire approximately 29,500 net acres, including 9,900 net royalty acres, in Reeves County, Texas, and Eddy County, New Mexico. The purchase, valued at $817.5 million, will significantly expand the company’s footprint in the Delaware Basin. The transaction, set to close by the end of Q3 2024, reflects Permian Resources’ aggressive expansion strategy and its confidence in leveraging acquired assets for long-term growth.

Acquisition Details and Financial Highlights

The acquisition encompasses a large, contiguous acreage position strategically located adjacent to Permian Resources’ existing operations. This addition includes over 200 gross operated, two-mile locations with high net revenue interests (NRIs), which will immediately compete for capital investment. The assets also feature extensive midstream infrastructure, including more than 100 miles of oil and natural gas pipelines, a robust water recycling facility with a capacity of approximately 25,000 barrels per day, and over 10,000 surface acres.

The deal is valued at an attractive multiple of approximately 3.4 times the projected 2025 EBITDAX and offers a free cash flow yield of 17%. The acquisition is expected to be accretive to key metrics such as cash flow per share, free cash flow per share, and net asset value per share. Permian Resources anticipates a free cash flow per share increase of over 5% annually over the next decade.

Permian Resources to acquire Reeves County assets from Occidental Petroleum in a move to expand its Delaware Basin footprint with significant midstream infrastructure and high-return potential.

Strategic Fit and Management Insights

Will Hickey, Co-CEO of Permian Resources, emphasized the strategic alignment of the acquisition, noting its high-return potential and proximity to existing assets. Hickey expressed confidence in the company’s ability to reduce costs and enhance operational efficiency through this addition. Similarly, James Walter, Co-CEO, highlighted that this acquisition aligns with Permian Resources’ strategy of pursuing valuable M&A opportunities. The substantial midstream assets and surface acreage are expected to offer significant flexibility and potential for future growth.

Infrastructure and Development Plans

The acquired assets in Reeves County include a fully integrated midstream system, which will support superior economics and operational flexibility. This infrastructure comprises extensive oil and gas gathering systems and essential water facilities such as saltwater disposal wells and frac ponds. The robust midstream system is designed to handle associated volumes efficiently and accommodate future growth or third-party volumes.

Permian Resources plans to begin development on these properties in Q4 2024, with an anticipated production rate of approximately 15,000 barrels of oil equivalent per day, with a significant portion derived from oil.

Financing and Liquidity

Permian Resources intends to finance the acquisition through a combination of equity and debt, maintaining a leverage-neutral position on a pro forma basis. The company anticipates an end-of-year 2024 net debt-to-EBITDAX ratio of approximately 1x, ensuring a strong balance sheet and financial stability.

Headquartered in Midland, Texas, Permian Resources is an independent oil and natural gas company with a focus on high-return properties in the Delaware Basin. This acquisition underscores its position as a leading Permian Basin pure-play exploration and production company.