Permian bought the Occidental assets in the Delaware basin for $ 818 M. The assets produce 15 K BoE/d. There is no press release from Permian Resources (Oxy has one), but there is a presentation on their website.
https://permianres.com/wp-content/uploads/2024/07/Presentation-PR-Announces-Core-Delaware-Basin-Bolt-On.pdf
Permian Resources - $ 818 M Delaware acquisition from Occidental
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Petroleum economist
- Posts: 376
- Joined: Wed Aug 23, 2023 7:01 am
- Location: The Netherlands
-
Petroleum economist
- Posts: 376
- Joined: Wed Aug 23, 2023 7:01 am
- Location: The Netherlands
Permian Resources - Occidental acquistion has limited impact
Summary
Permian Resources nowadays is such a size that a 15 K BoE/d acquisition only adds 4.6% to the total production. Permian can grow short term but still lacks reserves for long term growth. The $ 818 M payment (I assume it is cash – no details) can be absorbed without too much effort into the balance sheet. The eps goes up a bit and the PE down a bit. The acquisition should have no impact on shareholder returns. Overall impact is very limited.
Reserves/production
• The additional reserves have as yet not been shared with the public.
• The additional production is 15 K BoE/d, bring PR production to approx. 344 K BoE/d.
• No new outlook for 2024 was provided as yet.
• Permian can grow to 350-365 K BoE/d in 2028, but then will start decline unless additional reserves are booked or further acquisitions are made.
• The Eddy County acquisition in Jan 2024 and the Occidental acquisition in July are in line with this.
Balance sheet
• Assuming the payments are all cash (no details) the solvency will go down from 62.0% to a still high 58.8%
• The 2024 debt/EBITDA ratio will be around a sound 1.0-1.2, to reduce thereafter.
• The changes in the balance sheet do not affect the shareholder returns
Profitability
• The impact on the 2024 eps is very limited ($ 0.02)
• The eps in 2025 should increase with $ 0.05 to $ 2.26-2049 (PE 8.2-6.5) with WTI= $ 80-85/bbl.
Shareholder returns
• Permian targets to return 50% of the FCF to shareholders
• Dividends in 2025 should be $ 075-0.80.
• Share buybacks in 2025 can be $ 400-450/year, giving a total yield of 9.6%
Permian ranks a decent 30th out of 80 in my oil and gas company ranking. Its lack of long-term growth potential is its largest draw back.
Permian Resources nowadays is such a size that a 15 K BoE/d acquisition only adds 4.6% to the total production. Permian can grow short term but still lacks reserves for long term growth. The $ 818 M payment (I assume it is cash – no details) can be absorbed without too much effort into the balance sheet. The eps goes up a bit and the PE down a bit. The acquisition should have no impact on shareholder returns. Overall impact is very limited.
Reserves/production
• The additional reserves have as yet not been shared with the public.
• The additional production is 15 K BoE/d, bring PR production to approx. 344 K BoE/d.
• No new outlook for 2024 was provided as yet.
• Permian can grow to 350-365 K BoE/d in 2028, but then will start decline unless additional reserves are booked or further acquisitions are made.
• The Eddy County acquisition in Jan 2024 and the Occidental acquisition in July are in line with this.
Balance sheet
• Assuming the payments are all cash (no details) the solvency will go down from 62.0% to a still high 58.8%
• The 2024 debt/EBITDA ratio will be around a sound 1.0-1.2, to reduce thereafter.
• The changes in the balance sheet do not affect the shareholder returns
Profitability
• The impact on the 2024 eps is very limited ($ 0.02)
• The eps in 2025 should increase with $ 0.05 to $ 2.26-2049 (PE 8.2-6.5) with WTI= $ 80-85/bbl.
Shareholder returns
• Permian targets to return 50% of the FCF to shareholders
• Dividends in 2025 should be $ 075-0.80.
• Share buybacks in 2025 can be $ 400-450/year, giving a total yield of 9.6%
Permian ranks a decent 30th out of 80 in my oil and gas company ranking. Its lack of long-term growth potential is its largest draw back.
Re: Permian Resources - $ 818 M Delaware acquisition from Occidental
pr slide deck says:
Assets acquired at a compelling valuation and financial metrics
– ~3.4x 2025E EBITDAX and ~17% Free Cash Flow Yield
– Expect to maintain leverage of ~1x net debt-to-EBITDAX
• Transaction expected to close by the end of Q3 2024, subject to customary closing conditions and adjustments
Assumes $75 per Bbl / $3.00 per MMBtu flat pricing
As a point of reference SEP 2024 NG is struggling to stay above 2 and sep 2024 Crude is 75.61 and in backwardation and sep 2025 crude is 70.35, so midpoint for next year is about 73. The yields are lower with lower prices, obviously
Assets acquired at a compelling valuation and financial metrics
– ~3.4x 2025E EBITDAX and ~17% Free Cash Flow Yield
– Expect to maintain leverage of ~1x net debt-to-EBITDAX
• Transaction expected to close by the end of Q3 2024, subject to customary closing conditions and adjustments
Assumes $75 per Bbl / $3.00 per MMBtu flat pricing
As a point of reference SEP 2024 NG is struggling to stay above 2 and sep 2024 Crude is 75.61 and in backwardation and sep 2025 crude is 70.35, so midpoint for next year is about 73. The yields are lower with lower prices, obviously
Re: Permian Resources - $ 818 M Delaware acquisition from Occidental
This is going to be accretive to my valuation of PR, but for today's newsletter I am leaving my valuation of PR at $24/share. PR's production mix will improve with a slightly higher percentage of oil after the deal closes in September. Two respected energy sector analysts sent updated price targets for PR to TipRanks of $21 and $22.
HOUSTON, July 29, 2024 (GLOBE NEWSWIRE) -- Occidental (NYSE: OXY) today announced it has agreed to sell certain Delaware Basin assets in Texas and New Mexico to Permian Resources (NYSE: PR) for approximately $818 million and separately completed several dispositions totaling approximately $152 million in 2024. Sales proceeds from each of these transactions will go toward reducing debt.
Occidental previously announced a $4.5 billion-$6 billion divestiture program to be completed within 18 months of closing the acquisition of CrownRock, L.P. which is expected to occur in August.
“We are pleased with the significant progress to date on our divestiture program, which is aimed at derisking the financing of the CrownRock acquisition and accelerating our shareholder return pathway,” said President and CEO Vicki Hollub.
Occidental is selling Permian Resources approximately 27,500 net acres in the Barilla Draw Field of the Texas Delaware Basin and approximately 2,000 net acres in the New Mexico Delaware Basin, with combined net production for the fourth quarter of 2024 estimated at approximately 15,000 barrels of oil equivalent per day. The Permian Resources transaction is expected to close in the third quarter of 2024, subject to customary closing conditions.
HOUSTON, July 29, 2024 (GLOBE NEWSWIRE) -- Occidental (NYSE: OXY) today announced it has agreed to sell certain Delaware Basin assets in Texas and New Mexico to Permian Resources (NYSE: PR) for approximately $818 million and separately completed several dispositions totaling approximately $152 million in 2024. Sales proceeds from each of these transactions will go toward reducing debt.
Occidental previously announced a $4.5 billion-$6 billion divestiture program to be completed within 18 months of closing the acquisition of CrownRock, L.P. which is expected to occur in August.
“We are pleased with the significant progress to date on our divestiture program, which is aimed at derisking the financing of the CrownRock acquisition and accelerating our shareholder return pathway,” said President and CEO Vicki Hollub.
Occidental is selling Permian Resources approximately 27,500 net acres in the Barilla Draw Field of the Texas Delaware Basin and approximately 2,000 net acres in the New Mexico Delaware Basin, with combined net production for the fourth quarter of 2024 estimated at approximately 15,000 barrels of oil equivalent per day. The Permian Resources transaction is expected to close in the third quarter of 2024, subject to customary closing conditions.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group