With Permian M&A Cooling, Will Other Basins Catch a Cold?

An analyst by Mercer Capital showed production per acreage deals have skyrocketed 10x in the past six months, pushing the limits of what could constitute an economically feasible deal in the Permian Basin.

With the Permian M&A Cooling, Will Other Basins Catch a Cold?

In June, Mercer Capital senior financial analyst Justin J. F. Ramirez pointed to the slowing drip in Permian Basin deals. Not much has changed since then, with only Ring Energy’s agreement to acquire Stronghold Energy having made any ripples in the Permian’s pond. (Source: Hart Energy)

The Permian Basin remains firmly in control of the Lower 48, with Enverus last month describing it as the deal engine of domestic M&A transactions. But it is not invulnerable.

Signs are that even the Permian, facing the same death of a thousand cuts as other basins, may be cooling off. Particularly in the face of commodity price fluctuations, inflation, supply chain crimps and now recession fears, the Permian Basin’s flagging deal flow may have implications beyond Texas and New Mexico.

The Permian Basin’s last major announced E&P deal was a July 5 acquisition by Ring Energy Inc. to buy Stronghold Energy, a privately held operator backed by Warburg Pincus LLC. The agreement will pay Stronghold up to $465 million for assets in the Central Basin Platform, where its operations are focused on the development of about 37,000 net acres located primarily in Crane County, Texas.

In June, Mercer Capital senior financial analyst Justin J. F. Ramirez pointed to the slowing drip in Permian deals. Through the first six months of the year, Mercer counted 21 transactions in the past 12 months, six fewer than the same period that ended in 2021.

Not much has changed since then, with only Ring Energy’s deal having made any ripples in the Permian’s pond.

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Darren Barbee

Darren Barbee is senior editor for Oil and Gas Investor magazine.