Oil and gas companies continue to merge frequently in 2021 and the trend continued early this year with operations focusing on the Permian Basin in southeast New Mexico and West Texas.
Most recently, Desert Peak Minerals and Falcon Minerals Corporation announced a $1.9 billion merger on Jan. 12 with the combined company focusing 73 percent of its oil operations in the Permian.
Company officials also touted a “significant” position in the Eagle Ford Basin in southern Texas.
In total, the deal resulted in a net acreage of 139,000 acres, with 105,000 in the Permian, expected to produce up to 14,500 barrels of oil equivalent per day during the first half of 2022.
Based in Denver, the new company will be managed by Desert Peak and its shareholders will own 73 percent of the new company while Falcon will own 27 percent.
Following the transaction, the company will have 20 wells expected to be productive within the next year, and Desert Peak Chief Executive Officer Chris Conoscenti said the focus on the Permian would drive up profits in the prolific and cost-effective region for oil production.
“We believe the ownership of Permian minerals and royalties is trending toward larger-scale, more efficient institutional ownership,” he said. “Our strategy is to be the leading consolidator of these high quality Permian assets.
“We believe our scale is a clear strategic advantage in the minerals business as we are able to drive down fixed costs per unit of production with each acquisition, enhancing our cash margins.”
Falcon CEO Bryan Gunderson said consolidating assets through the merger could help insulate the company from the fossil fuel market’s volatility while increasing the scale of operations.
“As we have previously communicated to our shareholders, we believe scale matters in the minerals business, as it enhances the ability to drive greater consolidation, improves access to capital, and reduces volatility caused by asset concentration,” Gunderson said.
“We are proud of the business our management team and employees have built, and we are excited to partner with Desert Peak to provide our shareholders with a significant increase in scale and exposure to a large and diverse base of premier assets across the Permian Basin.”
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