Cimarex Energy (XEC) is the latest oil and gas company to expand its acreage in the Permian Basin.
Cimarex announced Monday that it would buy Resolute Energy (REN) for $1.6 billion, including debt. The deal will add 35,000 barrels of oil equivalent per day to Cimarex production. The deal is expected to close by the end of Q1.
Under the terms of the deal, Resolute shareholders can choose between 0.3943 of Cimarex shares, $35 in cash, or a combination of 0.2366 Cimarex shares and $14 in cash for each Resolute share.
“The Resolute assets are expected to generate free cash flow in 2019, basically funding any additional development capital from the start,” said Cimarex CEO Thomas Jorden said in the release.
Cimarex shares tumbled 6.2% to 83.26 in premarket trading on the stock market today. Resolute jumped 8.2% to 33.
Permian Basin M&A Heating Up
Oil majors have been expanding their operations in the Permian Basin in recent years in a effort to get more contiguous acreage as well laterals become longer.
Earlier this year, Diamondback Energy (FANG) agreed to buy Energen in a deal worth $9.2 billion, and BP (BP) reached a $10.5 billion deal to acquire BHP Billiton’s (BHP) Eagle Ford, Haynesville and Permian Basin shale assets.
And in March, Concho Resources (CXO) agreed to buy RSP Permian for $9.2 billion.
Meanwhile, Exxon Mobil (XOM), Chevron (CVX), ConocoPhillips (COP) and Royal Dutch Shell (RDSA) are reportedly interested in buying privately held Endeavor Energy Resources. Only 2% of its vast Permian Basin holdings have been developed.
In 2017, Exxon doubled its holdings in the Permian Basin, which accounts for one-third of U.S. production, with a $5.6 billion deal.