Whiting Petroleum is talking acquisition with Abraxas Petroleum Corp., a Texas-based company with operations in the Permian, unnamed sources told Reuters.
According to one of the sources, the mostly likely scenario was for an all-stock acquisition. According to another, the tie-up would boost Whiting’s acreage in the Permian and also help it spread its overhead costs over greater oil production, Reuters noted.
Neither of the companies confirmed or denied the report, and the Reuters sources said that reaching a deal is far from guaranteed.
Consolidation among U.S. oil independents has been a topic of discussion for analysts for a while now, with many of the opinion that both independents and Big Oil would be willing to exit other shale plays in the U.S. to focus on the already crowded Permian where production is rising the fastest.
Earlier this year, Bloomberg reported that a wave of M&A was coming to the Permian as the larger players sought to expand their presence there. Indeed, Big Oil majors have been selling their operations in Europe to focus on the Permian at home. Yet if the Reuters report is confirmed, it would highlight that it’s not just Big Oil that is doubling down on the Permian. Independents are growing bigger, too.
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Yesterday, Parsley Energy announced that it would buy rival Jagged Peak Energy for $1.62 billion in an all-stock deal. The acquisition would boost Parsley’s Permian acreage.
Shareholders don’t seem like they are too happy about this consolidation drive. Reuters reported on Monday that Parsley shares fell by as much as 11 percent following the deal announcement. On the other hand, consolidations usually cut costs, which should sit well with investors that have yet to see the higher returns they have been insisting on.
Besides the Permian, Abraxas Petroleum also has assets in the Rocky Mountains and in the Powder River Basin in Wyoming.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.