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Riley Will Pay $330 MM to Acquire Assets in NM from Pecos Oil & Gas
03/15/2023
Oklahoma City-based Riley Exploration Permian Inc. is extending its presence in New Mexico through the acquisition of oil and gas assets from Pecos Oil & Gas LLC, valued at $330 million in cash, according to the company's announcement on February 28.
The deal adds 11,700 contiguous net acres in Eddy County, New Mexico, with current production of 4,200 bbl/d (7,200 boe/d) to Riley Permian’s portfolio.
Additionally, the transaction provides Riley Permian with more than 100 gross horizontal development drilling locations and 100% ownership of associated water-gathering and disposal infrastructure, including about 70 miles of water-gathering pipelines.
Riley Permian considers that under-developed assets with extensive development potential will allow generating value creation potential through the drillbit. The company also noted that the acquisition will improve the company's cost structure, facilitate normalizing development cadence, and potentially lead to oilfield service cost savings.
The Yeso Formation, where the purchased assets are situated, has geological similarities to Riley Permian's core asset in the San Andres formation in Yoakum County, Texas. The company also has acreage in Lea and Roosevelt counties, New Mexico.
Riley Permian anticipates drilling and completion costs in the Yeso Trend being lower overall for shallower, conventional source rock compared to deeper shale wells, allowing the New Mexico asset to compete on drilling economics with the company’s core asset.
The transaction is estimated at 3.4x 2023 adjusted EBITDAX and a 15% free cash flow (FCF) yield, accretive relative to Riley Permian’s 2023 stand-alone metrics. The company plans to finance the acquisition using borrowings under the company’s revolving credit facility and proceeds from issuing new senior debt. Riley Permian plans to issue $200 million of senior unsecured notes upon closing the deal, which is anticipated occurring during the second quarter of 2023.
The purchase is forecasted to raise Riley Permian’s adjusted EBITDAX by almost 50% and FCF by roughly 70% in 2023 while allowing the company to compete more effectively on drilling economics with its core asset. Riley Permian's fourth-quarter and full-year 2022 earnings will be released on March 8.
Riley Exploration Permian Inc. was formed to build a premier Permian Basin pure-play business. The company went public through a reverse merger with Tengasco Inc. in an all-stock deal in February 2021.
Riley Exploration Permian, a US-based oil and natural gas company, is dedicated to capital efficiency and steady growth of its reserves, production, and cash flow through the acquisition, exploration, and development of reserves primarily within the Permian Basin.
The company has significant contiguous acreage positions in Texas and New Mexico, with favorable reservoir and geological characteristics primarily for oil development. REPX's assets have the potential to produce significant recoverable reserves, offsetting legacy Permian Basin fields. Since the 1930s and 1940s, Wasson and Brahaney fields have produced over 2.1 billion and 108 million barrels of oil equivalent, respectively.
The company's drilling program in the Permian Basin consists of both horizontal and vertical wells, targeting multiple formations including the Wolfcamp, Spraberry, and Clearfork.
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Vital (Formerly Laredo) Expands in Midland, Purchases Acreage From Driftwood Energy
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Vital Energy Inc. has made a significant acquisition, purchasing 11,200 net acres in Upton and Reagan counties, Texas. The deal, which involved a combination of cash and stock, was worth almost $214 million. This move comes shortly after the company's rebranding from Laredo Petroleum just one month ago.
Targa Resources: $3.55 Billion Cash Transaction to Acquire Lucid Energy
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On June 16 Targa Resources Corp. decided to acquire Lucid Energy Group, located in the Permian Basin, which is a part of Riverstone Holdings LLC and Goldman Sachs Asset Management. Firstly, Targa enlarged due to the recent “blot-on” acquisition of Southcross Energy in the Eagle Ford for $200 million and it will become bigger thanks to the $3.55 billion cash transaction. Targa’s financial position allowed it to utilize convenient opportunities to extend its company so it bought #Lucid using available cash and debt with an estimated pro forma year-end 2022 leverage around 3.5 times. According to Targa’s estimates, the acquisition of Lucid will increase the number of natural gas pipelines by 1,050 miles and add about 1.4 Bcf/d of cryogenic natural gas processing capacity in service or under construction located mainly in Eddy and Lea counties of New Mexico. The investment-grade producers source approximately 70% of current system volumes. According to the press release, a full-year standalone adjusted EBITDA is expected to be between $2.675 billion and $2.775 billion and reported year-end leverage ratio of about 2.7 times. Targa’s updated financial expectations assume NGL composite prices average $1.05 per gallon, crude oil prices average $100/bbl, and Waha natural gas prices average $6 per MMBtu for the remainder of 2022.
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Rangeland Energy has agreed to sell Rangeland Midstream Canada to Kingston Midstream Alberta and remains committed to future Canadian midstream investments. Texas-based Rangeland Energy, supported by financial partner EnCap Flatrock Midstream, has inked a deal to sell its Canadian subsidiary, Rangeland Midstream Canada Ltd., to Calgary's Kingston Midstream Alberta Ltd. for cash.
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The merger between ONEOK and Magellan received approval from Magellan shareholders, securing just 55% of the total votes at Magellan’s meeting on Sept. 21. ONEOK Inc. has successfully concluded the acquisition of Magellan Midstream Partners LP on Sept. 25. The deal will bring together their respective assets and expertise, resulting in a powerful entity boasting an extensive network of approximately 25,000 miles of pipelines primarily focused on transporting liquids.
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Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.