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Wednesday, December 2, 2020
Energy UPDATE: Fort Worth firm sells Permian Basin holdings for $2.8 billion

UPDATE: Fort Worth firm sells Permian Basin holdings for $2.8 billion

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Fort Worth-based Double Eagle Energy Permian LLC – as its name implies – has a keen focus on the burgeoning Permian Basin oil play.

On Feb. 7, those investments paid off when Parsley Energy Inc. of Austin agreed to purchase many of those Permian Basin assets for about $2.8 billion.

Austin-based Parsley said the deal includes undeveloped acreage and producing oil and gas properties, adding about 71,000 net acres to its acreage in the Midland Basin, bringing its total acreage in the Permian Basin to about 227,000. According to a presentation from Parsley, the acquired acreage was producing 3,600 net barrels of oil equivalent per day as of January 1, 2017.

Double Eagle Energy Permian was formed in 2016 through the merger of Double Eagle Lone Star LLC and Veritas Energy Partners Holdings LLC.

Cody Campbell and John Sellers are co-CEOs of the company. In April 2013, Sellers and Campbell formed a partnership with an affiliate of a New York-based private equity firm, Apollo Global Management, allowing the then-Double Eagle Lone Star company to expand its footprint.

As Texas Tech students, Campbell and Sellers began their business careers by founding a commercial real estate development firm. After Campbell graduated, he played offensive guard for the Indianapolis Colts.

According to a presentation on the deal from Parsley, the company’s planned rig additions associated with acquired acreage will lead to approximately 40 incremental well spuds in 2017, with 10 expected to produce this year.

Parsley said it plans to finance the cash portion of the acquisition through an offering of 36 million shares and debt.

Credit Suisse Securities (USA) LLC and Morgan Stanley are acting as joint lead bookrunners for the equity offering.

The deal comes just a few weeks after oil and gas giant Exxon Mobil Corp. announced it is buying the Permian Basin holdings of Fort Worth’s Bass family in a more than $6 billion stock and cash deal.

“Right now, the Permian Basin is hot and it’s hot because, No. 1, there are all these pay zones; it’s like a layer cake,” said Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University in Dallas.

A lone field can yield one layer of natural gas and another containing vast amounts of oil, and the advent of horizontal drilling and other technologies makes access to the hydrocarbons easier and cheaper, Weinstein said.

A barrel of oil currently sells for about $53, which is well above the break-even oil price of $30 to $40. Prices are expected to remain above $50 for the next five years, he said.

Weinstein said that big players like Exxon Mobil and Chevron Corp. determined in the 1980s that shale drilling wasn’t lucrative enough so they went offshore and invested in deepwater drilling. But now they’re seeing greater returns on the Permian and other land basins.

“There’s been a kind of rethink on the part of the majors,” Weinstein said, “and that’s a big shift.”

The Permian is comprised of a series of basins and other geologic formations in West Texas and southern New Mexico. It’s one of the most productive oil and gas regions in the U.S.

The energy industry spent billions of dollars buying land in West Texas last year, which is far more than it spent there the year before. Companies that have sold or leased their holdings are generally smaller entities looking to benefit from sales on higher land prices rather than invest in drilling operations, analysts say.

The region’s fortunes were further buoyed in November with a report by the U.S. Geological Survey that a vast field of shale rock could yield 20 billion barrels of oil, making it the largest source of shale oil the agency has ever assessed. The Wolfcamp Shale geologic formation in the Midland area also contains an estimated 16 trillion cubic feet of natural gas and 1.6 billion barrels of natural gas liquids, according to the agency.

The discovery is nearly three times larger than the shale oil found in 2013 in the Bakken and Three Forks formations in the Dakotas and Montana.

Ken Medlock, director of an energy-studies program at Rice University in Houston, said at the time that it seems “likely that we’re seeing the birth of a new Permian Basin.”

“The revival of the Permian Basin is going to last a couple of decades,” he added.

– The Associated Press contributed to this report


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