Permian Resources (PR) Signs Deal to Expand Permian Footprint

Permian Resources Corporation PR entered an agreement to acquire Earthstone Energy ESTE for $4.5 billion, which includes the assumption of the latter’s net debt.

The acquisition will form an independent exploration and production company focused on the Delaware Basin. The new company will be valued at around $14 billion. The deal is expected to complete by the end of 2023.

Permian Resources will issue 211 million shares of common stock in the transaction. Upon the deal closure, Permian Resources shareholders will own 73% of the combined company, while Earthstone shareholders will own the rest.

The acquisition will expand Permian Resources' existing footprint by adding 223,000 net acres in the Permian Basin. This will bring the combined company to more than 400,000 net acres with pro-forma production of 300,000 barrels of oil equivalent per day. In the Delaware Basin, Earthstone adds 56,000 net acres to the combined company.

The companies are currently operating 11 drilling rigs focused on the Delaware Basin. Once the deal closes, the new entity will move at least one of Earthstone’s two rigs in the Midland Basin to the Delaware Basin. In 2024, the combined company plans to allocate 90% of capital to Delaware Basin projects with high returns.

In recent years, Earthstone has significantly expanded its footprint through several acquisitions.  With the acquisition, Permian Resources has seen $30 million of annual general and administrative savings. It expects to gain from a lower cost of capital, resulting in potential financial synergies of $30 million per year.

Headquartered in Midland, TX, Permian Resources is an independent oil and gas company focused on the responsible acquisition, optimization and development of high-return oil and gas properties. The company’s assets and operations are based in the core of the Delaware Basin.

Permian Resources currently carries a Zack Rank #5 (Strong Sell).

Some better-ranked players in the energy sector are USA Compression Partners, LP USAC, currently sporting a Zacks Rank of 1 (Strong Buy), and Global Partners GLP, carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

USA Compression Partners is one of the largest independent natural gas compression services providers across the United States in terms of fleet horsepower.

USA Compression Partners has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The consensus estimate for USAC’s 2023 and 2024 earnings per share is pegged at 30 cents and 55 cents, respectively.

Global Partners is a leading operator of gasoline stations and convenience stores. Over the past 30 days, GLP has witnessed upward earnings estimate revisions for 2023 and 2024, respectively.

The Zacks Consensus Estimate for Global Partners’ 2023 and 2024 earnings per share is pegged at $3.46 and $3.69, respectively. GLP currently has a Zacks Style Score of A for Value and Growth.

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Global Partners LP (GLP) : Free Stock Analysis Report

USA Compression Partners, LP (USAC) : Free Stock Analysis Report

Earthstone Energy, Inc. (ESTE) : Free Stock Analysis Report

Permian Resources Corporation (PR) : Free Stock Analysis Report

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