Published: August 21, 2023 | Share This

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Permian Resources Corporation and Earthstone Energy have entered into a definitive agreement under which Permian Resources will acquire Earthstone in an all-stock transaction valued at approximately $4.5 billion, inclusive of Earthstone’s net debt.

“We believe the acquisition of Earthstone represents a compelling value proposition for our shareholders and strengthens our position as a premier Delaware Basin independent E&P. Earthstone’s Northern Delaware position brings high-quality acreage with core inventory that immediately competes for capital within our portfolio,” said Will Hickey, co-CEO of Permian Resources.

“Additionally, we have identified numerous ways to leverage our deep Delaware Basin experience and incremental scale to improve upon these assets across the board, including approximately $175 million of annual synergies. Permian Resources has a proven integration track record, and we believe the successful execution of these cost savings will create incremental value for both Permian Resources and Earthstone stakeholders,” added Hickey.

“We are very pleased to announce this transaction with Permian Resources and believe the combination of the two companies’ top-tier assets and history of success will create an even stronger large-cap E&P company which is uniquely positioned to drive profitable growth and development in the world-class Permian Basin,” said Robert Anderson, president and chief executive officer of Earthstone.

“In less than three years, we have grown Earthstone from a small-cap E&P company producing approximately 15,000 Boe per day to one with a production base of over 130,000 Boe per day, delivering significant value enhancement for shareholders along the way. Our success directly reflects our outstanding employees’ dedication, hard work and perseverance. I personally thank each and every one of our employees. I could not be prouder of the Earthstone team and the company we have built together,” added Anderson.

“As significant owners of the business, our primary goal is to drive value for our investors, and the Earthstone transaction is another example of value creation for shareholders. We expect the transaction to be accretive across all key financial metrics before synergies and significantly accretive including synergies, both over the short and long-term,” said James Walter, co-CEO of Permian Resources.

“After evaluating over $20 billion of potential transactions during the past twelve months, we firmly believe the acquisition of Earthstone represented the best transaction for Permian Resources. It checks all the boxes, enhancing shareholder value while improving upon an already best-in-class company,” added Walter.

Tangible Operational and Financial Synergies

Total synergies resulting from the transaction are expected to drive approximately $175 million in annual cash flow improvements, which include $145 million of operational and G&A synergies expected to be fully realized by year-end 2024. Expected annual operational synergies total $115 million and are primarily associated with reduced drilling, completions and facilities (DC&F), lease operating and midstream costs. Permian Resources expects to realize significant DC&F savings in the Delaware Basin through improved efficiencies and lower cost structure. The company expects to reduce LOE expense on a per unit basis through personnel and contract services optimization and enhanced production operations. Additionally, the combined company expects to leverage its enhanced size and scale to optimize pricing across completion, production, and midstream operations.

Permian Resources has identified $30 million of annual general and administrative savings. The combined company is also expected to benefit from a lower overall cost of capital, leading to potential financial synergies of $30 million annually. Permian Resources has proven operational and integration track records and plans to leverage its best practices and lower corporate cost structure to advance cost reductions across all operating expenses and capital expenditures. The all-stock transaction structure allows for shareholders of both Permian Resources and Earthstone to benefit from the cost synergies and significant upside potential of the combined companies.

Headquartered in Midland, Texas, Permian Resources is an independent oil and natural gas company focused on the responsible acquisition, optimization, and development of high-return oil and natural gas properties. The company’s assets and operations are located in the core of the Delaware Basin.

Earthstone Energy is a growth-oriented, independent energy company engaged in acquisitions and the development and operation of oil and natural gas properties. Its primary assets are located in the Permian Basin of New Mexico and West Texas.

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