Uinta Basin's XCL Seeks FTC OK to Buy Altamont Energy

XCL Resources is seeking federal regulatory approval to acquire fellow Utah producer Altamont Energy LLC, regulators said March 7.

Houston-based XCL Resources, a subsidiary of private equity firm EnCap Investments LP, has been in talks to acquire Colorado-based Altamont Energy since last summer, according to a petition published by the Federal Trade Commission.

However, XCL and EnCap are required to obtain prior approval by the FTC before acquiring any other waxy crude oil producer with an output of more than 2,000 bbl/d in certain Utah counties.

The requirement stems from a 2022 FTC settlement regarding EnCap’s acquisition of EP Energy Corp., which had operations in the Uinta Basin and in South Texas. EnCap was also required to divest EP’s Utah business and assets to Crescent Energy Co. under terms of the settlement.

XCL and EnCap argue that the proposed acquisition of Altamont Energy will not alter the competitive market for waxy crude oil supply.

The transaction would instead provide Altamont, a smaller producer than XCL, “the access to capital it needs,” according to FTC documents.

Both companies own wells and acreage holdings in Duchesne and Uintah counties, Utah, according to Rextag data.

XCL produced approximately 1.57 MMbbl of oil during December 2023—an average 50,645 bbl/d—according to the most recent figures from the Utah state oil and gas division. Average daily oil output for full-year 2023 was about 44,860 bbl/d.

Altamont produced 109,349 bbl of crude in December 2023—or around 3,527 bbl/d. Full-year oil production averaged 4,052 bbl/d.

Altamont counted 66 active wells in Utah as of last December, state data show. In an FTC filing, XCL reported operating 135 horizontal wells across 45,900 net acres in Utah—up from the 126 cited in Utah data in December.

XCL has three active rigs in the Uinta Basin, where the company drills, on average, about 70 new wells per year.

Altamont’s operations are focused on the Wasatch and Green River stacked formations in the Uinta Basin. Altamont completed eight horizontal wells that came online last year.

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Shopping a sale

XCL and Altamont began talking about a potential deal in August after Altamont contracted Houlihan Lokey as its investment banker to begin a marketing and sales process for the waxy crude producer, per the FTC petition.

Altamont and its bankers reached out to more than 300 parties in search of potential bidders; XCL came in highest and was selected as the buyer.

XCL “is uniquely positioned” to acquire Altamont and its Uinta assets, the company said in the FTC petition.

XCL owns acreage adjacent to Altamont’s own position in Duchesne and Uintah counties, and there are operational efficiencies to be gained by that proximity.

Altamont has no active rigs and no material growth plans to achieve without access to capital. XCL, meanwhile, bills itself as an efficient and low-cost operator in the Uinta.

Combining XCL with Altamont will further reduce operating costs associated with water and natural gas infrastructure and D&C operations.

Since the FTC investigated EnCap’s acquisition of EP Energy, “the competitive landscape in the Uinta Basin, including its supply into the Salt Lake City refiners, has changed significantly,” according to the petition.

A major reason is the boost in waxy crude oil production in the basin, which has saturated supply to refiners around Salt Lake City.

“Current production levels dramatically exceed the capacity of the refiners, and Uinta Basin producers are selling a growing portion—in XCL’s case, a majority—of their output outside the Salt Lake City area, primarily to the U.S. Gulf Coast,” XCL wrote.

One of the FTC’s concerns in the EnCap-EP Energy transaction was that increased upstream concentration in the Uinta Basin would result in higher prices and lower supply to Salt Lake City refiners.

Instead, the Salt Lake City refiners are glutted with too much waxy crude—putting refiners in the position of driving prices, rather than the Uinta producers doing so, XCL argues.

XCL also points to further upstream competition in the Uinta Basin. At least four new producers have entered the basin over the past 24 months by XCL’s count: Scout Energy Partners, Wasatch Energy Management Operating, Anschutz Corp. and Vaquero Energy have all brought wells online in the area.

Other long-dormant Uinta operators have also resumed operations recently, XCL said, including Berry Corp., Caerus Uinta and KGH Operating.

The public is allowed 30 days to submit comments on the proposed combination, the FTC said March 7.

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