Chevron’s Permian Deal with Cimarex Lines up Infrastructure

Chevron USA Inc., a subsidiary of Chevron Corporation, has inked a deal with Cimarex Energy Co. in the Permian Basin, giving the supergiant access to infrastructure to boost the value of its assets there.

Chevron and Denver-based Cimarex signed the joint development deal on Monday for 104,000 acres in Culberson Country, Texas, which will be operated by Cimarex, according to company statements.

The deal has Chevron paying out $60 million to acquire 50% of Cimarex's Triple Crown gathering system, in addition to a 50% interest in well drilled by Cimarex in 2013, Reuters reported.

This is an 8-year agreement that gives Chevron access to Cimarex's infrastructure, including roads and utilities necessary to develop assets.

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Chevron owns (both fully and partly) 1 million gross acres in the Permian's Delaware Basin.

Cimarex is an independent oil and gas exploration and production company with principal operations in the Mid-Continent and Permian Basin areas of the United States.

"After the market close yesterday, Cimarex Energy (XEC-$64.72: Hold) announced that it entered into a joint development agreement (JDA) across its acreage in the Culberson County, Texas with Chevron (CVX-$116.82: NR)," analysts from Topeka Capital Markets said.

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"We view the JDA as a slight positive, as it should allow XEC to more efficiently develop its acreage via optimal well placement in the 2nd Bone Spring and with longer laterals in the Wolfcamp. After spending some time re-assessing XEC's inventory in Permian Basin and Cana Woodford and with our lower long-term NGL price assumption, we are reducing our RNAV to $83.00 per share from $89.00 per share. As a result, we are reducing our price target to $74.00 per share from $80.00 per share."

By. Charles Kennedy of Oilprice.com