Generic Hero BannerGeneric Hero Banner
Latest market news

Permian consolidations set high standards

  • : Crude oil, Natural gas
  • 20/11/02

The prolific Permian basin has been central to the four major US oil and gas mergers this year — a catalyst role it will likely continue to play in the coming year.

While 2020's demand collapse has stopped producers from bragging about output growth and driven them to focus on free cash flow, large Permian positions are still seen as a long-term benefit. ConocoPhillips' deal to buy Concho Resources last month was motivated in part by the former's need for a significant foothold in the Permian that it has long been missing. The Pioneer Energy-Parsley Energy tie-up was about creating a Permian-centric company with enough financial heft and reserves for many years of profitable production, as was the September merger deal between Devon Energy and WPX. Even the early merger of the year, Chevron's acquisition of Noble Energy, had a strong Permian acreage position at its heart.

All four deals place those combined companies among the top eight producers in the Permian, each with nearly 250,000 b/d or more of output based on first quarter 2020 numbers (see chart). Rounding out that top eight are Occidental Petroleum and ExxonMobil — firms that are struggling with bigger issues than consolidating a Permian position right now — and EOG and Diamondback Energy.

EOG and Diamondback have expressed scepticism about mergers, but both are financially strong enough to take on a smaller competitor. Diamondback chief executive Travis Stice said in his second-quarter earnings call that debt issues encumber too many competitors to make deals work from a financial perspective, while the number of firms with top-tier acreage is limited. EOG has taken a similar stance, seeing better opportunities in its existing acreage. It is seen as the role model for the new US shale mantra of lower output growth and higher free cash flow generation that producers have been chanting since the spring.

A number of other producers linger with sizeable Permian footprints but mixed outlooks. Cimarex Energy appears to have made the shift to lower operating cost, higher free cash flow and more modest growth with prices around $40/bl, despite a $925mn loss in the second quarter. The company has 238,000 acres (965km²) in the Delaware basin of the Permian, in Texas and New Mexico, as well as 326,000 acres in the Woodford and Meramec formations in Oklahoma. With a market capitalisation of $2.4bn and enterprise value of $5bn, it falls below the $10bn threshold that many analysts say is needed to remain relevant to investors.

Ovintiv, led by former BP veteran Doug Suttles, is more diversified, with acreage in Canada's Montney fields, and the Anadarko and Permian basins. It has a similar market capitalisation of $2.6bn, but an enterprise value of $10.9bn thanks to much higher debt — a sizeable barrier to becoming an acquisition target. The firm also just reported a third-quarter loss of $1.5bn, largely on non-cash asset impairments. But it also appears to have successfully turned the corner into effective free cash flow generation, touting $1.7bn returned to shareholders in the last two years.

But mergers are still tricky in the current price environment and with mid-term crude demand recovery in doubt.

"We've been dancing on the head of a pin at $40 for the last 90 days or so," says Bryan Benoit, managing partner of Grant Thornton's energy advisory practice. That price is not strong enough to signal a significant boost in production or a consolidation wave, but not low enough to tip many companies into bankruptcy — notwithstanding the 17 exploration and production company bankruptcies in the third quarter.

Many banks have set $40/bl as their mark for this fall's redetermination process, Benoit said, so companies that looked to be in trouble in the second quarter are able to hang on a little longer.

So near and yet so far

Mergers among companies with overlappling assets in the Permian may seem like a sensible way to grow financial and production heft while lowering costs. But a study by consultancy Deloitte of US oil and gas mergers since 2014 found the end results rarely met expectations. Deals involving producers with contiguous acres did lead to some lower costs — about 15pc on average — but those savings did not fully offset the higher upfront spending to combine two operators.

The deals so far have been among firms that are some of the strongest financially and have the most productive assets. The remaining field has fewer strong players and many with significant debt burdens that are likely to complicate the theoretical logic of combining small firms with geographically overlapping assets.

Permian basin oil output, 1Q20

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

25/03/18

State of emergency after Nigeria pipeline attack:Update

State of emergency after Nigeria pipeline attack:Update

Updates with state of emergency declared London, 18 March (Argus) — The Nigerian government has declared a state of emergency in Rivers State, after an apparent attack on the Trans-Niger Pipeline (TNP) halted crude movements to Nigeria's Bonny Light export terminal. A fire occurred on the pipeline at the border of the Kpor and Bodo communities, and the pipeline's management has shut down the affected section, the Rivers State police said. Operator Renaissance Africa said it is responding to an incident. The 180,000 b/d, 60km TNP carries crude to the Bonny terminal, from where the Bonny Light grade is exported. TNP was operated until 14 March by Shell subsidiary SPDC . The pipeline has been the target of repeated oil theft, vandalism and sabotage in the past, and Shell shut the TNP entirely between April and October 2022. Nigerian President Bola Tinubu today said the resumption of "disturbing incidents" had happened "without the [state] governor taking any action to curtail them". Tinubu suspended the Rivers State governor and his deputy and said the region will be under federal control, effective immediately. It is unclear what if any effect this will have on the region's oil production, a source within state-owned oil firm NNPC told Argus . But it appears the pipeline attack has halted loadings at the Bonny terminal. The Almi Voyager was the most recent tanker to load there, with around 550,000 bl of crude on 14 March. Loading operations are seemingly halted as the pumping of 475,000 bl to NNPC's 210,000 b/d Port Harcourt refinery was the next scheduled operation before the explosion. Market sources said they are monitoring the situation and awaiting a possible declaration of force majeure by Renaissance Africa. Sources added that loading operations at the export terminal were already running up to two weeks behind schedule. By Elena Mataro, Adebiyi Olusolape and Sanjana Shivdas Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Norway's Equinor sells first Johan Castberg crude cargo


25/03/18
25/03/18

Norway's Equinor sells first Johan Castberg crude cargo

London, 18 March (Argus) — Norway's state-controlled Equinor has sold its first cargo of crude from the new Johan Castberg field in the Barents Sea to Spanish firm Repsol ahead of first oil next month, according to market sources. Repsol will probably run the crude at its 220,000 b/d Bilbao refinery, the sources said. The Johan Castberg field had been expected to come on stream in the final quarter of 2024, but start-up was delayed, first to January-February this year because of bad weather, and more recently to April. Equinor delayed the first loading of Johan Castberg crude to 14-17 April from 21-24 February. The April export programme comprises four 700,000 bl cargoes, with Equinor loading three and Johan Castberg partner Var Energi loading the fourth. Three of the April cargoes are unsold, and Equinor is planning to issue separate tenders for them. It is not immediately clear what price the first cargo fetched. Traders have said previously that the grade could be priced at a premium to sweet middle distillate-rich Norwegian grades such as Troll or Alvheim. Johan Castberg crude will also be rich in middle distillates and have have a gravity of 34.7°API with a sulphur content of just 0.16pc when the field starts production, according to an assay. The field is expected to produce 220,000 b/d at plateau and has estimated recoverable reserves of 450mn-650mn bl. Equinor operates Johan Castberg with a 50pc stake, Var Energi has 30pc and Norwegian state-owned Petoro has 20pc. By Lina Bulyk and Sanjana Shivdas Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Trans-Niger Pipeline fire halts crude to Bonny terminal


25/03/18
25/03/18

Trans-Niger Pipeline fire halts crude to Bonny terminal

London, 18 March (Argus) — A fire on the Trans-Niger Pipeline (TNP) appears to have halted crude movements to Nigeria's Bonny Light export terminal. The Rivers State police said a fire occurred on the pipeline at the border of Kpor and Bodo communities. It said the pipeline's management shut down the affected section. Operator Renaissance Africa said it is responding to an incident. The 180,000 b/d, 60km TNP carries crude to the Bonny terminal, from where the Bonny Light grade is exported. TNP was operated until 14 March by Shell subsidiary SPDC . The pipeline has been the target of repeated oil theft, vandalism and sabotage in the past, and Shell shut the TNP entirely between April and October 2022. A source within state-owned NNPC told Argus the Almi Voyager was the most recent crude tanker to load at the Bonny terminal, with around 550,000 bl of crude on 14 March. Loading operations are seemingly halted as the pumping of 475,000 bl to NNPC's 210,000 b/d Port Harcourt refinery was the next scheduled operation before the explosion. Market sources said they are monitoring the situation and awaiting a possible declaration of force majeure by Renaissance Africa. Sources added loading operations at the export terminal were already running up to two weeks behind schedule. By Elena Mataro, Adebiyi Olusolape and Sanjana Shivdas Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Trump set to meet with oil, gas executives


25/03/17
25/03/17

Trump set to meet with oil, gas executives

Washington, 17 March (Argus) — President Donald Trump is scheduled to meet this week with US oil and gas executives to discuss policies that would help achieve "energy dominance", according to an industry group participating in the meeting. Trump and his team are scheduled to meet on Wednesday with executives that serve on the leadership committee of the American Petroleum Institute (API) and staff from the influential industry group, API said. Trump has enjoyed close ties with many oil executives, who have supported his regulatory initiatives and tax cuts, even as his tariff policies have raised concerns among some industry officials. "We appreciate the opportunity to discuss how American oil and natural gas are driving economic growth, strengthening our national security and supporting consumers with the President and his team," API said. The White House did not respond to a request for comment. The upcoming meeting is set to broadly focus on how to achieve Trump's goal for "energy dominance". API last year released a detailed policy roadmap, with plans to scrap regulations that would require more electric vehicles, restart licensing of US LNG export facilities, expand offshore oil and gas leasing, repeal a new $900/t fee on methane leaks, expedite permitting and e retain corporate tax cuts from 2017. The Trump administration has already accomplished some of those policies, and is starting work on others. The White House sees cutting energy prices through deregulation and expanded leasing as part of its strategy to ease inflation. Trump last week said he was "very happy" with oil prices at $65/bl, while US treasury secretary Scott Bessent has set a target of $50/bl. But producers would have to crimp production in the Permian basin at that price, former Pioneer Natural Resources chief executive Scott Sheffield said last week. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Carney to strike while iron, steel and aluminum are hot


25/03/17
25/03/17

Carney to strike while iron, steel and aluminum are hot

Calgary, 17 March (Argus) — Newly minted Canadian prime minister Mark Carney will likely call a national election soon to both secure his seat in Canada's parliament and win a public mandate in the ongoing trade war with the US. Carney has helped revive the Liberal party's fortunes and narrow the gap between main rival Conservative leader Pierre Poilievre in recent weeks, raising the odds he will call for a national election soon. Poilievre has lost momentum because of rising anti-US sentiment in Canada while the governing Liberals have capitalized on newfound attention in what many in the country see as a fight against US president Donald Trump. An election would occur 37-51 days after being called, meaning Canadians could go to the polls as early as late-April. Because Carney did not hold elected office when his party chose him to succeed Justin Trudeau, he must also find a parliamentary seat to run for in the election. At the same time voters will be voting on all other seats in parliament, essentially putting the Liberal party's nine-year run leading the country in the balance. Parliament has been out of session for several months after Trudeau asked for an extension of a regular recess while his party chose a new leader. It is scheduled to return on 24 March although Carney could ask to extend it again. If it does return to session, Carney will be without a seat and unable to defend himself against Conservative attacks in the House of Commons. Until then, Carney will continue to lead Canada's response to the US-induced trade war, which has included tariffs on energy and a wide range of other imports imposed then removed earlier this month, as well as ongoing tariffs against steel and aluminum imports. A tight contest A virtual tie in the polls for Canada's two largest federal parties promises a tight race for the expected spring election where Carney will try to shake unpopular policies from Trudeau's time — some of which Carney had formerly endorsed — while addressing louder calls by Canadians for exporting energy to non-US countries. Both parties appear to like their chances, but the US-Canada trade war has meant Liberal ministers leading important areas of policy are dominating national media, leaving Poilievre searching for airtime. Poilievre warns voters that Carney is an out-of-touch elitist similar to his close ally Trudeau. Carney, who has held prominent roles in banking and on corporate boards, counters he has "actually worked in the private sector" while characterizing Poilievre as a lifelong politician. But Carney still knows he must distance himself from Trudeau. He began that process last week by using his power to eliminate the consumer carbon tax , beating Poilievre — who has been calling for this for years — to the punch. Diversifying trade, inter-provincially and internationally, is top of mind for both leaders, but the Liberals still seem reluctant to talk about oil pipelines, aside from the recently expanded and federally-owned 890,000 b/d Trans Mountain system. The system has provided flexibility for crude exporters looking to bypass the US and is now seen in a new light by many outside of the industry amid the trade war. Canada will be a superpower in "both conventional and clean energies" by creating new trade corridors with "reliable trade partners", Carney said on 14 March. But the country's largest oil producing provinces have their reservations. "Mark Carney is responsible for net zero banking," Alberta premier Danielle Smith said last week at the CERAWeek by S&P Global conference in Houston, Texas. "He's been on a war path against the energy industry his entire career." Saskatchewan premier Scott Moe meanwhile urged Carney to cancel this week's visit to Europe, his first international trip as prime minister, and instead prioritize escalating trade wars with both the US and China. "There are higher stakes at play here," Moe said. "We don't have a trade war with the European Union today." By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more