The Daley Note: August 23, 2023
Permian Basin rig counts have seen a pullback in recent months, falling from a recent high of 353 in late April to 326 rigs in mid-August. While softer commodity prices account for some of the reduction, rigs are also vanishing as a result of upstream consolidation.
The Permian has seen many mergers and acquisitions (M&A) on both sides of the basin in 2023. Industry consolidation is one factor East Daley Analytics considers in our long-term rig outlook, which in turn drives the supply outlook in the Permian Supply and Demand Forecast and our company Financial Blueprints.
EDA’s review of producers involved in recent M&A deals in the Midland and Delaware sub-basins, either as buyers or sellers, started the year averaging 63 rigs. Through mid-August, rig counts for this sample of operators had fallen by 18 rigs, a decline of nearly 30% (see figure).
Most of the acreage acquired in recent Permian deals is held by production, so acquiring operators don’t see a need to keep legacy rigs running once deals have closed. Executives are also under pressure to show returns from consolidation, and dropping rigs is one way to cut expenses. Rigs have mainly fallen for the acquisition targets, while the acquiring companies have kept their rig numbers mostly steady.
On Monday, Permian Resources (PR) became the latest upstream mover, reaching a deal on Monday (August 21) to acquire Earthstone Energy (ESTE) for $4.5B in stock. Diamondback Energy (FANG) has been another active operator, acquiring Lario and FireBird Energy. Civitas Resources (CIVI) bought Hibernia Resources and Tap Rock Resources, and Ovintiv (OVV) purchased Black Swan Oil and Gas and Petrolegacy.
While PR did not announce rig cuts in the latest Earthstone deal, many of the other acquiring companies guided to lower activity once their respective mergers closed. We have seen these plans come to fruition, with rig counts for the acquired targets falling from 18 at the start of 2023 to only 7 rigs in August. – James Taylor Tickers: CIVI, ESTE, FANG, OVV, PR.
Energy Data Studio
East Daley Analytics has launched Energy Data Studio, a platform for our industry-leading midstream data and commodity production forecasts. All clients have access to the new client portal. If you have not yet logged in, please fill out the form to request a registration email be resent.
Energy Data Studio leverages our G&P data set for insights into midstream assets across every major oil and gas basin in North America. Users can navigate detailed visual dashboards by region, pipeline, or individual asset to understand crude oil, natural gas and NGL supply at the most granular level.
Energy Data Studio is available through data downloads from the visual interface, in Excel files, or as a direct feed delivered into subscribers’ workflow via secure file transfer. To learn more about Energy Data Studio, please contact insight@eastdaley.com.
Review the Year Ahead in Dirty Little Secrets
The 2023 Dirty Little Secrets is Now Available! Is Midstream on the cusp of another infrastructure wave? Find out in our new annual report.
Dirty Little Secrets reviews the outlook for Midstream and commodity markets in 2023 and the years ahead. East Daley discusses the outlook for crude oil, natural gas and NGLs and the impacts to midstream assets in our 2023 Dirty Little Secrets annual market report. Click here for a copy of the 2023 Dirty Little Secrets report.
The Daley Note
Subscribe to The Daley Note (TDN) for midstream insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices and EDA research likely to affect markets in the short term.