Buyout firm EnCap Investments is looking at a possible sale of $3 billion worth of Permian-focused oil and gas producers, anonymous sources told Reuters on Thursday.
The assets under sales consideration include Novo Oil & Gas Holdings, and Forge Energy II. Novo Oil & Gas LLC, focused in the Permian's Delaware Basin, was estimated by Enverus last year to hold fewer than five years of higher-quality inventory at sub-$45 oil, with sources estimating the company's valuation at more than $2 billion. It holds around 17,000 net acres with an estimated production rate of 60,000 boepd.
Reuters sources estimated that Forge Energy II could be valued at more than $600 million, encompassing more than 40,000 gross acres that currently produce 14,000 boepd.
Shifting oil prices could raise or lower the companies' valuation estimates.
The news comes just days after energy producer Ovintiv Inc. said it was close to a deal to purchase $4 billion in Midland-centric Permian assets owned by Black Swan Oil & Gas, Piedra Resources, and PetroLegacy II-those companies are all controlled by EnCap Investments. Matador Resources also purchased EnCap's Advance Energy Partners for $1.6 billion back in January.
"As shale hits its middle innings, we believe high-return drilling inventory locations are going to be more valuable than ever," Ovintiv's chief executive, Brendan McCracken, told Reuters earlier this week. Ovintiv said it would sell its assets in the Bakken to a company managed by EnCap.
In November last year, EnCap told Reuters that it was attempting to raise a new fund focused on investments in oil and gas production, in what would be its first oil and gas fund since 2017.
The oil and gas industry is sitting on a pile of cash thanks to higher oil prices and greater capital discipline-a reality that has rekindled M&A activity in the industry.
By Juliane Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More