EOG to acquire Permian producer for $2.65bn

OREANDA-NEWS. September 07, 2016. Houston-based independent producer EOG will acquire Yates Petroleum in a \\$2.65bn, stock-heavy deal that will expand its Permian basin footprint significantly.

EOG will issue 26.06mn shares of stock valued at about \\$2.3bn, pay \\$37mn in cash and assume \\$245mn in debt for privately held Yates.

Yates has about 1.6mn acres of leases across the western US, including 186,000 net acres in the Delaware basin section of the Permian, 200,000 acres in the Power River basin in Wyoming, and another 1.1mn net acres in New Mexico, Wyoming, Colorado, Montana, North Dakota and Utah. Yates has proved developed reserves of 44mn bl of oil equivalent (boe) and daily production of 29,600 boe, 48pc of it crude.

EOG is one of the largest US oil producers with 551,000 boe/d in production. After the deal, EOG's position in the prolific Delaware basin would grow to 424,000 acres.

US M&A activity has been more muted than many expected during the low commodity prices of the last two years. Rather than many large deals leading to massive consolidation, there has been a steady stream of small and mid-sized deals as companies sell off assets considered non-core and buy others.

The Permian basin in Texas and New Mexico has seen the highest levels of activity as the well-developed region continues to be profitable for producers, even with oil prices below \\$50/bl. The Permian accounted for 16 out of 56 deals in US shale basins in the first half of 2016 according to consultancy Deloitte, more than twice the number of deals in the next most active region, the Marcellus.

Earlier this year Concho Resources paid \\$1.63bn for about 40,000 net acres to expand its Midland basin position to 150,000 net acres with a total output of 30,000 b/d of oil equivalent (boe/d). Parsley Energy bought 9,140 net acres for \\$400mn.

EOG sold about \\$425mn in assets throughout the country so far this year, much of it natural gas-related production. The company posted a second quarter loss of \\$293mn, compared with a profit \\$5.3bn a year earlier.