Private equity drives $5.5 billion worth of deals in Permian

The country’s most productive oil field, the Permian Basin straddling West Texas and southeastern New Mexico, is driving nearly half of all oil industry mergers and acquisitions, according to an energy research firm.

During the second quarter of 2022, oil and gas production companies signed some $12 billion worth of deals, data from Enverus Intelligence Research shows. That’s about 18 percent less than the $14.7 billion of deals earlier in the year.

Mergers and acquisitions often follow the health of the economy: The number of deals declines during a downtown and rises in good times. Even with soaring inflation, a potential recession and a slower pace of mergers, the price of crude — which settled Friday at $97.59 — is still attracting buyers.

Deals involving private-equity sellers made up about 80 percent of the quarter’s value, according to Enverus. The research firm notes that the total number of deals would have slowed even more without the onslaught of private equitybacked sales.

“As anticipated, the spike in commodity prices that followed Russia’s invasion of Ukraine temporarily stalled mergers and acquisitions as buyers and sellers disagreed on the value of assets,” Enverus Intelligence Research Director Andrew Dittmar said in a statement. “High prices, though, also encouraged a rush by private equity firms to test the waters for mergers and acquisitions.”

The Permian Basin produced $5.5 billion in deal activity, mostly thanks to the merger between Midland-based Colgate Energy Partners and Denver’s Centennial Resource Development. Enverus expects that the Permian will be the main driver of mergers moving forward.

While market volatility may spook some investors, data firm PwC expects the pace of oil and gas mergers will speed up during the second half of the year. In its outlook, the international firm said private equity firms attracted to high oil prices are driving the deals.