Permian Resources, a leading energy company, has recently confirmed its plans to acquire Earthstone Energy in an all-stock deal worth a staggering $4.5 billion. This merger has significant implications for Permian Resources and presents several noteworthy advantages.
Increased Cash Returns to Shareholders
- As part of the acquisition, Permian Resources intends to enhance its cash returns to shareholders. They have outlined their commitment to a 20% increase in quarterly dividends, resulting in a new rate of 6 cents per share, effective from the first quarter of 2024.
Expanded Acreage in Prominent Oil Fields
- Through this deal, Permian Resources will expand its presence in the Permian Basin, the largest oil field in the United States. The acquisition will grant them an additional 223,000 acres, solidifying their position in this crucial territory.
- Furthermore, Permian Resources will gain approximately 56,000 net acres in the Delaware Basin, further bolstering their portfolio and market position.
Transaction Details and Timeline
- Under the terms of the agreement, each share of Earthstone common stock (ESTE) will be exchanged for 1.446 shares of Permian Resources common stock.
- The closure of the deal is expected by the end of 2023, subject to both regulatory and shareholder approvals.
Co-Chief Executive’s Perspective
- Will Hickey, the Co-Chief Executive of Permian Resources, expressed enthusiasm about the acquisition of Earthstone. He believes that this move will greatly benefit shareholders and strengthen Permian Resources’ standing as a premier explorer and producer in the thriving Delaware Basin.
- In light of the announcement, Permian Resources’ stock saw a slight decline of 3.7% during premarket trading on Monday, with shares priced at $12.41.
- Conversely, Earthstone Energy’s stock experienced a surge of 9.1%, reaching $17.71.
Other Acquisitions in the Energy Sector
- It’s worth noting that Chevron (CVX) made a similar move in May by acquiring PDC Energy, signifying a trend of strategic acquisitions within the energy industry.