Coterra made its long-awaited move to grow dramatically in the Permian, moving on large portions in New Mexico’s Delaware Basin. Franklin Mountain, in particular, was seen as a likely takeover target in recent months. (Source: Coterra Energy, Shutterstock)
Coterra Energy Inc. is acquiring Permian Basin assets from Franklin Mountain Energy and Avant Natural Resources through two separate definitive agreements worth $3.95 billion, Coterra announced early Nov. 13.
The company is acquiring 400 to 550 net Permian Basin locations primarily targeting the Bone Spring, Harkey, Avalon and Lower Wolfcamp/Penn Shale. The deals will add 49,000 net acres in Lea County, New Mexico, which are contiguous with its northern Delaware Basin acreage, to create an 83,000-acre portfolio in the Delaware.
Coterra is funding the deals with $2.95 billion in cash and $1 billion in common stock, or approximately 40.9 million shares.
The announcement is a long-awaited move by Coterra to grow dramatically in the Permian, moving on large portions in New Mexico’s Delaware Basin. Franklin Mountain, in particular, was seen as a likely takeover target in recent months.
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Coterra’s New Mexico locations will increase by about 75% and its Permian locations by about 25%. The assets have an average lateral length of 9,500 ft and the deals include approximately 125 miles of pipeline and other infrastructure.
The assets’ estimated oil production for 2025 is 40 MMbbl/d to 50 MMbbl/d and total equivalent production of 60 MMboe/d to 70 MMboe/d.
“We have been drilling horizontal wells in Lea County, New Mexico, since 2010 and are extremely excited with the recent results and future opportunity across the area,” Chairman, CEO and President Tom Jorden said in the deals’ press release. “The newly scaled platform provides a long runway for capital efficient development and substantial free cash flow generation. Importantly, we are maintaining an industry-leading balance sheet.”
The deals are valued at 3.8x the estimated fourth-quarter 2024 annualized EBITDAX and approximately 13% of the estimated 2025 free cash flow yield at $70/bbl WTI and $3.00/MMBtu Henry Hub price assumptions, according to the press release.
The acquired assets have an estimated additional capex of $400 million to $500 million for Coterra, the announcement said.
The company will finance the cash portion of the purchase price through a combination of cash on hand and new borrowings.
Both transactions are effective Oct. 1 and are expected to close during the first quarter of 2025, subject to customary closing conditions. Neither transaction is subject to the closing of the other.
JPMorgan Chase Bank NA, PNC Capital Markets LLC and TD Securities (USA) LLC have provided committed financing for the transaction.
Gibson, Dunn & Crutcher LLP is serving as legal adviser to Coterra. Veriten served as independent adviser.
Jefferies LLC is serving as financial adviser to Franklin Mountain Energy. and Kirkland & Ellis LLP served as legal advisor to Franklin Mountain Energy.
TPH&Co. and Petrie Partners LLC are acting as financial advisers to Avant Natural Resources. Kirkland & Ellis LLP served as legal advisor to Avant Natural Resources.
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