Crestwood sold for $7.1 billion amid string of Permian Basin oil and gas mergers

A Dallas-based natural gas midstream company said it planned to buy one of the largest gas processing companies in the Permian Basin.

Energy Transfer Operating announced Aug. 16 it intended to buy out Crestwood, in a deal valued at $7.1 billion, about a year after Crestwood bought Permian Basin-focused Sendero Midstream in July 2022 for about $600 million.

The Crestwood sale, which also includes assets in the Williston Basin in North Dakota, the Powder River Basin in Colorado and the Delaware Basin in southeast New Mexico was expected to add a total of 2 billion cubic feet per day of natural gas gathering capacity to Enterprise’s operations.

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The sale also added 1.4 billion cubic feet per day of natural gas processing capacity, read a company announcement, 340,000 barrels per day of crude oil gathering.

Another 10 million barrels of storage capacity would be added to Enterprise’s system following the sale, along with trucking and rail terminals, read the announcement.

“These systems are anchored by predominantly investment-grade producer customers with firm, long-term contracts, and significant acreage dedications,” the announcement read.

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The sale of Crestwood was followed by another merger among oil and gas operators in the Permian Basin, as Permian Resources announced Monday it planned to acquire Earthstone Energy in a $4.5 billion deal.

That deal included 223,000 acres in the Delaware Basin of New Mexico, upping Permian Resources' presence in the region to 400,000 acres with 300,000 barrels of oil equivalent per day (boepd).

Will Hickey, co-Chief Executive Officer of Permian Resources said the deal would improve his company’s presence in the Delaware Basin on the western side of the greater Permian as exploration and production (E&P) operator.

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“We believe the acquisition of Earthstone represents a compelling value proposition for our shareholders and strengthens our position as a premier Delaware Basin independent E&P,” he said. “Earthstone’s Northern Delaware position brings high-quality acreage with core inventory that immediately competes for capital within our portfolio.”

Earthstone CEO Robert Anderson said the sale was intended to increase returns to the company’s investors, as part of a broader trend seeing oil and gas operators in the Permian consolidate to increase revenue.

“We believe this all-stock transaction provides Earthstone’s shareholders with excellent value for their investment now and in the future,” Anderson said.

“We are very pleased to announce this transaction with Permian Resources and believe the combination of the two companies’ top-tier assets and history of success will create an even stronger large-cap E&P company which is uniquely positioned to drive profitable growth and development in the world-class Permian Basin.”

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Andrew Dittmar, director of Enverus Intelligence Research, an international energy analytics firm, said the deal made Permian Resources the third-largest operator in the Permian.

He said the deal was indicative of higher value for public company mergers rather than adding private equity, expecting more similar deals in the future.

“Given the ramp up in the valuations in private equity assets over the last year, public company (mergers and acquisitions) is starting to look like a more attractive proposition for buyers to build scale versus targeting private equity deals,” Dittmar said.

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He said Earthstone also bought assets in the Midland Basin, on the eastern side of the Permian, and a small position in the Eagle Ford Basin of southern Texas that could soon be sold as the company was likely to focus on the Delaware Basin.

“Besides the Delaware position, which is the focus of the deal for Permian Resources, Earthstone Energy brings to the table a sizable Midland Basin asset base and a small Eagle Ford position,” Dittmar said.

The recent wave of multi-billion-dollar transactions came as the Permian Basin, New Mexico and Texas continued to lead the U.S. in active drilling rigs, although saw a slight downtick in the last week, according to the latest data from Baker Hughes.

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As of Friday, New Mexico was at 112 rigs, down one in the last week, records show, and Texas maintained its rig count at 312 rigs.

The Permian Basin also held steady with 327 rigs in the last week, Baker Hughes reported Friday, while Texas and New Mexico were first and second in the U.S. for rig counts, respectively.

And while the Permian Basin was the most productive oilfield in the U.S., it was expected to decline by 13,000 barrels of oil per day in September for a total of about 5.79 million bopd, according to the Energy Information Administration (EIA).

The Permian was expected to increase natural gas production by 35 million cubic feet per day next month, the EIA reported, for a total of about 23.7 billion cf/d – the second-most among U.S. shale basins.

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.

This article originally appeared on Carlsbad Current-Argus: Crestwood sold for $7.1B amid string of Permian oil gas and mergers