$141M Permian Basin oil and gas deal finalized as more companies move into region

A $141 million acquisition in the Permian Basin became the latest sale to close in the region as it was expected to continued growing in production of both oil and natural gas.

Kimbell Royalty Partners said May 17 it completed a deal announced in April to buy assets on the eastern Midland sub-basin of the Permian in Howard and Borden counties in Texas.

The acquired assets included about 60,000 acres in the region, expected produce about 1,901 barrels of oil equivalent per in the next year – 77 percent oil and 12 percent natural gas.

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The assets also included 806 royalty acres, and about 5.3 million barrels of proven oil reserves, along with three active rigs as of March 31 and 300 producing wells.

Meanwhile, Epsilon Energy of Houston said it planned to spend about $14 million to acquire a 25 percent interest in about 12,373 acres in Ector County, Texas, also in the Midland Basin, participating in drilling 2 wells through the rest of the year.

This was Epsilon’s second Permian Basin acquisition of the year, following its purchase of a 10 percent interest in two wells recently drilled in Eddy County, in the western Delaware sub-basing that straddles the border between southeast New Mexico and West Texas.

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“We are excited to announce our second new development-focused transaction in the Permian Basin,” said Epsilon Chief Executive Officer Jason Stabell. “These investments add liquids to our production mix and the potential for a significant future investment runway in the Ector County project with a well-aligned and basin focused operator.”

He said the Eddy County deal would help the company grow its presence in the nation-leading basin, position for future growth and future deals throughout the Permian.

“We are excited to announce a development-focused transaction in a new project area in the Permian Basin, partnered with a basin-focused operator whose principals have a long operating history,” Stabell said. “We see this as a first step toward our growth objectives and a blueprint for future transactions.”

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The Permian Basin’s oil and gas production were expected to grow in the next month, according to data from the Energy Information Administration (EIA), by 15,000 barrels per day (bpd) and 82 million cubic feet per day (cfd), respectively.

This would raise production in the basin to 5.7 million bpd of oil and 22.5 billion cfd of natural gas, the EIA reported.

That’s why Midland-based exploration and production company Garrison Energy Holdings drew a $500 million line of credit to seek out new drilling assets throughout the region in both the Delaware and Midland basins, according to a company announcement.

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“There is an abundance of opportunity in the region, and we are already evaluating deals ranging from as small as a section with high quality inventory to as large as upwards of one billion dollars, given our investor's ability to add additional equity capital for the right opportunity,” said Executive Chairman Steve Weatherl.

The Permian Basin continued to lead the U.S. in active oil and gas drilling rigs, with 349 rigs as of Friday, according to the latest data from Baker Hughes, following a decline of four rigs in the last week.

The two states that share the Permian Basin, Texas and New Mexico, maintained their positions as the first- and second-highest rig count in the U.S.

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New Mexico added a rig for its total of 109 rigs, records show, while Texas dropped nine rigs for its total of 357 rigs.

In a May 18 report, the EIA said New Mexico and Texas led the U.S. in crude oil production in 2022, also contributing more than any other state in growth of U.S. oil.

New Mexico led the nation in production growth for the third year in a row in 2022, the report showed, increasing by about 300,000 bpd to a total of 1.6 million bpd last year – a record for the state, the EIA reported.

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That’s about half of U.S.’ total crude oil production growth of about 600,000 bpd, the report read, as the nation averaged about 11.9 million bpd last year.

But as production grew and oil supplies increased, the EIA said Monday it expected lower oil prices in the second half of this year and 2024.

Domestic oil was trading at about $72 a barrel Monday morning, according to the Chicago Mercantile Exchange, holding steady in the low $70s throughout most of May.

Recent supply constraints and high demand driven by production cuts agreed to by the Organization of Petroleum Exporting Countries for the rest of the year could cause oil prices to rise slightly in the coming weeks, but increased exports from Russia and decreasing manufacturing activity in China could put downward pressure on the market, read the report.

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.

This article originally appeared on Carlsbad Current-Argus: $141M Permian Basin oil and gas deal finalized amid regional growth