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Exxon Buys Permian Assets

Recent articles in “Oil Voice” and “Rigzone” provide details and perspectives for ExxonMobil’s (XOM) recent purchase of oil and gas assets from the Bass family of Ft. Worth.

XOM acquired 275,000 acres of leasehold, 250,000 of which are in the Permian Basin, 3.4 billion barrels of oil equivalent (boe) reserves, and 18,000 boe per day of net production. Both reserves and production volumes are about 70% liquids.  The transaction will more than double XOM’s Permian reserves.

The acreage is located in the highly prolific, oil-prone, Delaware Basin of the Permian. XOM paid $5.6 billion in stock and pledged to pay up to an additional $1 billion in contingent payments based on development results.

XOM Chairman and CEO, Darren W. Woods, opined “This acquisition strengthens ExxonMobil’s significant presence in the dominant U. S. growth area for onshore production. This investment gives us an exceptional Delaware Basin position in a proven multi-stacked play that can generate attractive returns in a low-price environment….By utilizing ExxonMobil’s technological strength coupled with its unconventional development capabilities we can drill the longest lateral wells in the Permian Basin, reducing development costs and increasing reserve capture.”

This transaction validates the industry wide strategy of concentrating on the Delaware Basin. Research firm Jefferies International Limited priced the transaction at about $19.5 K per acre based on the initial purchase price and as much as $23.4 K per acre if all the contingent payments are considered.  This compares favorably with an industry average of $33 K per acre for recent Permian acquisitions, excluding the EOG Resources purchase of Yates Petroleum properties.

While the transaction might be slightly dilutive on stock price and earnings per share in the short run, Jefferies considers the purchase good value for shareholders.

The latest example of this trend of investments in the Permian Basin is Noble Energy’s agreement to purchase Clayton Williams Energy for $2.7 billion.

To read the details of the Exxon acquisition, please go to https://www.oilvoice.com/Press/1453/ExxonMobil-to-Acquire-Companies-Doubling-Permian-Basin-Resource-to-6-Billion-Barrels?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29

To put the Exxon acquisition in perspective, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=148144&utm_source=DailyNewsletter&utm_medium=email&utm_term=2017-01-17&utm_content=read&utm_campaign=feature_2 .

Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide.  Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.