The FireBird Energy team, fresh off a blockbuster Midland Basin deal and securing a new private-equity commitment, is searching for opportunities to develop another Permian Basin position.

Last month, FireBird Energy II announced securing more than $500 million in equity to pursue M&A in the Permian. The company’s fundraising was anchored by Houston-based private equity firm Quantum Energy Partners.

FireBird II is the successor to Fort Worth-based FireBird Energy LLC, which sold to Midland-based E&P Diamondback Energy Inc. in a $1.75 billion cash-and-stock transaction in December.

Travis Thompson, co-founder and CEO of FireBird II, told Hart Energy that it wasn’t long after selling to Diamondback that the team decided to fundraise for its next Permian-focused venture.

“It was early this year we stacked hands and said, ‘If we can get a commitment from a group that allows us to build a company of scale, then we would all be interested in doing that,” Thompson told Hart Energy.

RELATED: Diamondback Energy Completes FireBird Acquisition for $1.75 Billion

Midland moves

The FireBird team has a lot of experience in the Midland Basin. FireBird, after all, was wholly focused on building an asset in the Midland.

Diamondback’s FireBird acquisition added approximately 75,000 gross (68,000 net) contiguous acres in the western Midland Basin and estimated production of about 17,000 bbl/d of oil (22,000 boe/d).

Diamondback Energy Midland Basin Acreage Map
Diamondback’s acquisition of FireBird Energy LLC included about 75,000 gross (68,000 net) acres in the Midland Basin with estimated production of around 17,000 barrels per day (Source: Diamondback Energy investor presentation)

Since the team has a breadth of experience and relationships working on the Midland side of the Permian, FireBird II is also focusing its initial acquisition efforts in that area, Thompson said.

However, Thompson isn’t counting out acquisition opportunities in the competitive Delaware Basin, where members of the FireBird team also have significant knowledge and experience.

“I would look for us to possibly expand into the Delaware as time moves on,” Thompson said.

RELATED: Permian Resources Closes Delaware Basin Bolt-On, Grassroots A&D

E&Ps compete for Permian runway

Oil and gas producers from supermajors to independents are searching for scale in the Permian, the Lower 48’s top oil-producing region.

Public players including Callon Petroleum, Ovintiv Inc., Matador Resources and Diamondback have spent billions of dollars on M&A to grow their Permian production and inventory.

And after years of industry consolidation and basin development, there are fewer options to capture large acreage positions in the core of the Midland and Delaware. An April analysis of private E&Ps in the Permian by Piper Sandler & Co. found that private operators generally owned more fringe positions on the outskirts of the core resource play.

Thompson said there could be opportunities for FireBird II to invest capital in the core of the Midland Basin. But the company also sees a lot of potential in developing areas that have been passed over by other operators or drilled without modern technologies.

When the first iteration of FireBird – backed by RedBird Capital Partners and Ontario Teachers’ Pension Plan – began making its first set of acquisitions in 2018, some may have said the company’s position was too far west to be in the core of the Midland, Thompson said.

But the company grew its western Midland Basin footprint from 28,000 acres up to more than 70,000 acres, including through a major acquisition from Chevron Corp. in late 2021.

As the Permian matured over time and inventory became more scarce, FireBird’s Midland position became more attractive for a larger E&P like Diamondback.

FireBird II sees upside in deploying a similar strategy.

“I think the question is: Can our group identify areas that have been overlooked?” Thompson said.

The company recently closed on its financial commitments and had yet to make an acquisition as of early May.

FireBird II is actively searching for deals including mineral, working and leasehold interests in the Permian and is engaging with potential sellers, he said.

First-quarter Permian A&D

A number of E&Ps have announced A&D in the Permian this earnings season as they shore up inventory or refocus their operations.

Callon Petroleum unveiled plans in early May to exit the Eagle Ford play in South Texas to singularly focus on the Permian.

Callon will divest its Eagle Ford assets and use some of the cash generated by the sale to acquire assets in the Delaware Basin. Taken together, the two transactions are valued at about $1.13 billion.

Permian Resources completed over $200 million in Delaware Basin deals during the quarter, including scooping up royalty acreage and closing a bolt-on deal.

Diamondback continued to divest non-core assets in the Permian in the first quarter: The company closed Texas deals to sell about 19,000 net acres in Glasscock County and about 4,900 acres in Ward and Winkler counties.

Diamondback also sold a 10% equity ownership in the Gray Oak crude pipeline for $180 million.

RELATED: Analysts: Callon’s $1.1 Billion A&D Aids Debt Reduction, Investor Returns