Permian Resources said it would buy Earthstone Energy in an all-stock transaction valued at about $4.5 billion, including debt, boosting the shale producer’s presence in the Delaware Basin.
Delaware Basin, a part of the wider Permian Basin, is a prime target for producers looking to increase their inventory.
The shale patch, which lies between Texas and New Mexico, has the necessary infrastructure and is known for high productivity and large undeveloped reserves.
Earthstone last year advanced its consolidation strategy, closing three deals totaling $2 billion, including two northern Delaware Basin asset acquisitions. Earlier this month, it also closed a $1.5 billion deal to buy Novo Oil & Gas Holdings.
With Monday’s deal, Permian Resources would have pro forma production of about 300,000 barrels of oil equivalent per day (boepd).
The deal consists of 1.446 shares of Permian Resources common stock for each share of Earthstone common stock, giving it a per share value of $18.64 and representing a premium of 14.8% based on Earthstone’s last close.
Shares of Earthstone jumped 12.6% to $18.28 in afternoon trading, while those of Permian Resources were trading flat at $12.87.
The deal, expected to close by this year-end, carries an equity value of $2.6 billion, according to Reuters calculation.
After the deal closes, existing Permian Resources and Earthstone shareholders would own about 73% and 27% of the combined company, respectively.
“Rather than pursue the common private equity acquisition, Permian is picking up another public company,” Andrew Dittmar, director Enverus Intelligence Research said.
“Given the ramp up in the valuations in private equity assets over the last year, public company M&A is starting to look like a more attractive proposition for buyers to build scale versus targeting private equity deals,” Dittmar added.
Permian Resources’ executive management team would lead the combined company, with the headquarters remaining in Midland, Texas.
