$465M in Permian Basin lands sold for oil and gas production as market heats up
Adrian Hedden
Carlsbad Current-Argus
A dip in oil prices did not lead to a slowdown of oil and gas transactions in the Permian Basin as hundreds of millions of dollars continued to change hands weekly in the U.S.' most active fossil fuel region.
Domestic crude oil was trading at about $103 a barrel Monday morning, per the latest data from the Chicago Mercantile Exchange.
The latest price marked an about $20 decline in the last month from a peak of $122 a barrel reported June 6, almost meeting the year's highest oil price at $123 a barrel reported March 8.
More:Permian Basin natural gas pipelines expanding in response to fossil fuel market growth
But despite the drop in price, oil price remained in the triple digits, which did not occur in 2020 or 2021 as the COVID-19 pandemic led to restrictions on travel and business and a slump in fuel demand.
That lack of demand meant energy companies reduced production, but recently struggled to meet the market's rapid recovery as COVID-19 vaccines became widely available.
The resulting energy shortage, combined with Russia's recent exit from the global market after it invaded Ukraine, drove up the value of American fossil fuels and saw operators increasing their operations in the busy Permian Basin which spans West Texas and southeast New Mexico.
More:$1.2 billion in sales of Permian Basin lands in New Mexico announced as fuel demand grows
There were 350 oil and gas rigs across the region as of Friday, per the latest report from Baker Hughes, a growth of 113 rigs in the last year.
Texas had the most in the U.S. and New Mexico was second.
New Mexico held steady at 112 rigs in the last week, Baker Hughes reported, a 49 percent increase of 37 rigs from a total of 75 rigs on the same date last year.
More:Supreme Court greenhouse gas ruling splits New Mexico leaders on party lines
Texas added a rig for its total of 361 oil and gas rigs, records show, and was up 137 from a total of 224 last year.
In an apparent effort to capitalize on the market's growth, Ring Energy based in The Woodlands, Texas near Houston became the latest company to announce a large acquisition in the Permian.
The deal, valued at about $465 million saw Ring buy out the assets of Stronghold Energy, mostly in Crane County, Texas near Odessa.
More:Oil and gas land sale held in New Mexico Permian Basin after months of delays
Stronghold's operations are focused on developing about 37,000 operated acres in the area for oil and gas production and included more than 200 drilling locations.
It was estimated those properties would produce up to 19,000 barrels of oil equivalent – 70 percent oil –by the end of 2022.
Ring Chief Executive Officer Paul McKinney said the deal would complement the company's existing operations in the basin and would "immediately" increase revenue while doubling production.
More:$1.9 billion oil and gas merger targets Permian Basin amid growing energy prices
"The Transaction truly complements our existing footprint of conventional-focused Central Basin Platform and Northwest Shelf asset positions in the Permian Basin," McKinney said. "We intend to leverage our extensive expertise in applying the newest unconventional and conventional technologies to optimally develop Stronghold's deep inventory of investment opportunities."
Money made from the assets acquired in the sale, McKinney said, could be used for future acquisitions in the region he said would remain profitable for the foreseeable future.
"Once we complete the Transaction, we will have materially increased our inventory of high rate-of-return drilling, recompletion and workover projects, and fully expect to increase our activity across our expanded footprint," he said.
"This will allow us to expand even further through potential acquisitions or enhance stockholder returns through other potential return of capital opportunities."
Oil and gas production companies weren't the only segment of the industry and region seeing increased value during the Permian's rise in value.
Carlsbad-based oilfield service company Two Brother was sold to NextMart in a deal announced July 1, as Next Mart continued efforts to increase its position in the region.
Two Brothers supplies equipment for oilfield cleanup like Super Vac trucks and Hot Oilers to operators around the basin.
The deal included about $3 million in assets and equipment, per the announcement, and Two Brothers generated about $1.6 million in revenue last year, expecting to increase to $3 million in revenue in 2022.
"They are a fast-growing oil field service business in one of the hottest oil and gas production areas domestically, the Permian Basin," said Next Mart CEO William Bouyea. "They fit perfectly in the portfolio of business operations we now own in the hot oil and gas market of the Permian Basin."
Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.