Permian Basin sees continued growth, mergers amid high oil prices, increased operations
Adrian HeddenA Houston-based oil and gas producer is looking to get into the Permian Basin through a recently-announced merger with a company already invested in the region during a time of heightened grown in the U.S. fossil fuel sector driven by increased demand and lower global supplies.
The growth in prices and operations in the region led to more companies investing in North America’s most active shale play, looking to capitalize on the demand for oil and gas produced in the U.S.
Falcon Minerals Corporation planned to merge with Desert Peak Minerals, per a May 5 announcement, expanding Falcon’s asset portfolio to include the U.S.’ most productive fossil fuel region: the Permian Basin of West Texas and southeast New Mexico.
Falcon already holds assets in the Eagle Ford Shale of southern Texas, along with the Marcellus Shale in Pennsylvania, Ohio and West Virginia.
Desert Peak is focused on the Permian, holding more than 105,000 acres for production in the region.
After the merger, the combined company will be known as Sitio Royalties and Desert Peak Chief Executive Officer Christopher Conoscenti who will also serve as CEO of Sitio the company looks forward to building its presence in the Permian Basina area.
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“We are excited to announce our prospective new name of Sitio Royalties. In Spanish, Sitio means a site or a place, and historically it was a measure of a large parcel of land in Spanish Texas. The name recognizes the unique cultural heritage of West Texas, the focus area of our business,” he said.
The deal was part of ongoing efforts, Conoscenti said, to consolidate assets and drive up returns on investment.
“Rooted in the past but looking to the future, we will, as a combined platform, continue to consolidate the highly fragmented ownership of minerals and royalties,” he said.
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The deal was expected to close in the second quarter of 2022.
“We are excited to cross another milestone in this transaction process, and we look forward to completing the transaction during the second quarter as previously announced,” said Falcon Chief Executive Officer Bryan Gunderson.
Russia conflict raises value of U.S. energy, Permian Basin operations
After Russia invaded Ukraine earlier this spring, the global energy leader was removed from international markets, putting greater pressure on U.S. producers and sending energy prices higher than before the market was disrupted by the COVID-19 pandemic.
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Oil prices held in the triple digits since the invasion, with domestic oil trading at $114 a barrel Tuesday morning, per the Chicago Mercantile Exchange, and predicted hold at more than $100 a barrel until the end of the year.
Those higher prices meant weekly growth in oil and gas rig counts in the Permian Basin and the two states that share the shale play.
New Mexico held at steady at 98 rigs compared to last week, per data from Baker Hughes released Friday, 28 more than the state’s 70 rigs reported a year ago.
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Texas added one rig in the last week, Baker Hughes reported Friday, for a total of 345 – 129 rigs higher than the 216 reported last year on the same date.
Permian Basin-wide there were 335 rigs on Friday, an increase of 104 in the last year, records show.
Amid growing interest in the land of the Permian Basin, growth also continued in the management of wastewater resulting from drilling and extraction of oil and gas.
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Aris Water Solutions earlier this month announced it reached a deal with Chevron to take on all of the global energy leader’s water handling and management operations in the Permian Basin.
This included operations in the western Delaware sub-basin of the Permian in Eddy and Lea counties in New Mexico, along with Culberson and Reeves counties in Texas.
The work was intended to treat more of Chevron’s produced water as the company expected to increase its Permian Basin oil output by 15 percent this year, per a recent announcement, and Aris Chief Executive Officer Amanda Brock said it would help Chevron reduce its environmental impact.
“We are excited Chevron has chosen to expand their existing relationship with us in such a meaningful manner. We have worked with Chevron for a number of years and have repeatedly proven our ability to deliver secure takeaway and re-use solutions,” Brock said.
“We continue to make great progress expanding our system, capabilities, and customer base. This agreement increases Aris’s overall acreage giving Aris the premier dedicated acreage position in the Northern Delaware Basin.”
Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.