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Blackstone Group LP is partnering with two energy companies to buy assets in the Permian, one of the few shale plays in the U.S. where production is still profitable at current oil prices. The companies involved are Jetta Operating Company and Guidon Energy.
With Jetta, Blackstone will look for attractive assets in the Delaware Basin in West Texas as well as in southern New Mexico, for which purpose the partners have allocated US$1 billion.
The second partnership, with assets of US$500 million, will focus on assets in the Midland Basin. Blackstone said, as quoted by Bloomberg, that later on it is willing to add more funds to this partnership.
The Permian has been attracting a lot of attention this year because of low breakeven prices there. In June, when the number of active drilling rigs started rising for the first time since the tanking of oil prices in February, five of the new rigs that were brought on stream were in the Permian.
Operators of oil fields in the Permian started ramping up production as oil inched higher, and a number of private equity firms got interested in the play. Pioneer Resources, for one, said in June that it was planning to allocate US$1.8 billion – that’s 90 percent of its budget – to its Permian business. Occidental Petroleum, another major in the Permian, said it was going to spend US$3 billion to raise its output in the play by 4-6 percent.
Now, the two Blackstone deals yet again highlight the attractiveness of the Permian, once called America’s sleeping giant, which has this year seen the bulk of asset acquisition deals in the energy industry, with their combined value close to US$10 billion. In comparison, the second most popular destination for asset buys – the Scoop/STACK play – has attracted about US$2.5 billion in acquisition deals so far this year.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.