Finding M&A targets in Permian becoming difficult

A rush of deal-making in the Permian basin in the last year-and-a-half has resulted in private operators cashing in and while the acquirers consolidated assets, it makes further acquisitions a challenge, Diamondback Energy, Inc. chief executive officer Travis Stice said at the company’s second quarter 2023 conference call.

Diamondback acquired Lario Permian, LLC and FireBird Energy LLC late last year, which are now fully integrated into the firm’s operations, said Stice. He didn’t rule out further acquisitions going forward but added that the firm was being very selective with its deals.

“There’s just really few opportunities out there,” he said.

The US$1.5-billion Lario Permian and $1.6-billion FireBird deals were part of a wave of M&A activity over the last 18 months, making Diamondback the fourth biggest spender on Permian deals in 2022, according to Evaluate Energy data.

Activity in the first half of 2023 continued apace with US$23.3 billion of deals which involved Permian assets completed or in progress, compared to US$16.6 billion and US$13.2 billion completed in the first and second half of 2022, respectively, Evaluate Energy data shows.

For more on Evaluate Energy’s M&A database, click here.

Diamondback is being very selective about its M&A strategy going forward, Stice noted.

“There was a rush primarily on the private equity side to get deals into the market,” he said. “Going forward, it’s not important to win every deal. It’s important to win deals that make us not just bigger but better.”

ExxonMobil Corporation chief executive officer Darren Woods echoed this sentiment when he said in the firm’s second quarter results that the firm would continue to be “pretty picky acquirers” in the Permian and elsewhere.

ExxonMobil has been rumoured to be in talks with public Permian player Pioneer Natural Resources Company, but there were no updates on the potential deal during the company’s second quarter conference call.

ConocoPhillips chief executive officer Ryan Lance said the firm was now “mostly focused on the organic side of the portfolio,” with no current plans for acquisitions.