BY Richard Summerfield
In an all-stock transaction valued at around $4.5bn, including debt, Permian Resources has agreed to acquire Earthstone Energy.
The deal consists of 1.446 shares of Permian Resources common stock for each share of Earthstone common stock, giving it a per share value of $18.64 and a premium of 14.8 percent based on Earthstone’s close on Friday, the last day of trading before the deal was announced.
The deal has been unanimously approved by the boards of directors of both Permian Resources and Earthstone and is expected to close by the end of 2023, subject to customary closing conditions, regulatory approvals and shareholder approvals.
Once the transaction is complete, Permian Resources’ board of directors will be expanded to consist of 11 directors, including the addition of two representatives from Earthstone. Permian Resources’ executive management team will lead the combined company with the headquarters remaining in Midland, Texas. Permian Resources shareholders will own approximately 73 percent of the combined company and existing Earthstone shareholders will own approximately 27 percent.
“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,” said Will Hickey, co-chief executive of Permian Resources. “Earthstone’s Northern Delaware position brings high-quality acreage with core inventory that immediately competes for capital within our portfolio. 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.”
“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 of Earthstone. “We believe this all-stock transaction provides Earthstone’s shareholders with excellent value for their investment now and in the future. 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.”
“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,” said James Walter, co-chief executive of Permian Resources. “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. 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.”
Looking forward, Permian has identified $30m 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 $30m annually.
News: Permian Resources to buy Earthstone Energy in $4.5 bln deal