Permian Acquisitions - Which Private Producer Is Next?

|
Includes: MRO
by: BTU Analytics

Summary

The number of large private producers in the Permian basin has dwindled as acreage acquisition appetite has proved insatiable over the last six months.

Private Producer, Mewbourne, now ranks as the 15th largest operator by volume across the Permian basin.

Surge Energy and Mewbourne lead the pack in drilling activity with 6 rigs drilling in the Midland and Delaware basins.

The number of large private producers in the Permian basin has dwindled as acreage acquisition appetite has proved insatiable over the last six months. The latest in a string of Permian acquisitions is Marathon Oil's (NYSE: MRO) purchase of 21,000 net acres from Black Mountain Oil & Gas and other private sellers announced today, a bolt-on to the 70,000 net acre acquisition announced two weeks ago that brought yet another major oil player into the Permian basin. After a run of significant acquisitions, who are the largest potential targets still operating in the basin?

The top ten, currently remaining, privately held producers account for over 10% of Permian production on a BOE basis as of November 2016. Mewbourne Oil Company is the largest, operating over 60 MBoe/d of production across the Permian, nearly double the volume from the beginning of 2015.

With the boost in production volumes over the last two years, Mewbourne now ranks as the 15thlargest operator by volume across the Permian basin. Not every private producer is growing as fast as Mewbourne though. Production volumes for many of the top ten private producers have remained relatively stagnant to declining over the last 2 years. However, appropriately named Surge Energy has seen a surge in volumes growing to over 20 MBoe/d as of November from its operations primarily focused in Crosby, Howard, and Borden counties.

In terms of drilling activity though, Surge Energy and Mewbourne lead the pack as well with 6 rigs drilling in the Midland and Delaware basins respectively. EXL Petroleum, which took a $500M commitment from Quantum Energy Partners in 2014, has 5 rigs running in the field as the 3rd most active private producer in regards to active operated horizontal drilling rigs.

Which one of these producers will be picked off next? We'll have to wait and see. But basin M&A has implications that reverberate beyond the buyers and sellers. BTU's Upstream Outlook recently featured a deep dive on takeaway constraints, proposed infrastructure and basin growth rates.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.