According to Wood Mackenzie’s analysis, total transaction value in Permian assets has now eclipsed US$100 billion for 2023. The prior peak was US$65 billion in 2019. This most recent deal will create the sixth soon-to-be 1 million boe/d US L48 producer, with others including Chevron, EOG, ExxonMobil, EQT and ConocoPhillips. In the Permian specifically, OXY will become a top three producer behind the majors, pumping more oil and gas pro-forma than Pioneer did at the time of its sale announcement.
“It’s another deal done by a global E&P that anticipates making the acquired Midland asset better via unique technical work,” said Clarke. “Three-mile laterals will be more common going forward and it’ll be easier for a massive buyer like OXY to tie-up large piles of capital in specific projects to unlock full potential of the acreage, including exploration.”
Continued Research Director Ryan Duman, said: “OXY did not need additional Permian inventory, but the company’s position in the Midland Basin was light. The only other two private Permian E&Ps of comparable scale are Endeavor and Mewbourne, and we see sales from those two E&Ps as less likely. Remaining Permian teams looking to monetise are in a sellers’ market.”
Clarke notes that the deal does increase cash flow concentration risk and that US$4.5 billion to US$6 billion of divestments are planned.
“We consider the Gulf of Mexico (GoM) a candidate for disposal in this regard,” said Clarke. “The US GoM is fast becoming non-core in OXY’s US shale-rich portfolio, accounting for only 10% of current production. OXY has an advantage in any GoM sale because it holds assets with 100% ownership. Rockies assets – PRB and DJ farm-downs – are other possible disposals too.”
