The 2014-2016 oil price crash sparked a land rush in the Permian, where drillers can produce crude at low breakeven costs compared with other regions. With the best land spoken for, energy companies are now turning to mergers and acquisitions to enhance their positions in the region underlying western Texas and eastern New Mexico.
That's illustrated in the Chevron-Anadarko deal, which connects a large patch of Chevron's Permian acreage in Culberson County, Texas, with Anadarko's holdings in neighboring Reeves and Loving counties. Wirth says Chevron plans to add more rigs, expand pad drilling and introduce his company's digital analysis to the Anadarko-held land.
"Clearly, a large driver of the deal is Anadarko's prized position in the Delaware Basin where Chevron increases its position by 240,000 net acres to over 1,400,000 net acres," said Andrew Dittmar, a mergers and acquisitions analyst at Drillinginfo. "The Delaware Basin currently provides the best well economics of any shale play in the country."
According to sources, Occidental Petroleum also sought to snap up Anadarko. Occidental operates around the world, but its U.S. operations are focused on the Permian — including in the Delaware Basin sub-region that Chevron highlighted.
The Chevron deal will likely prompt oil majors to consider purchases of Permian players like Pioneer Natural Resources, EOG Resources and even Occidental, said Dan Eberhart, CEO at oilfield services firm Canary.
"Chevron buying Anadarko is the first in a series of takeovers as oil companies rush to scale to make shale work," Eberhart said in an email. "It is nearly always cheaper to drill for oil on Wall Street than in the oil patch."