Another Billion-Dollar Buy In The Permian
As experts predicted, things are heating up around the Permian Basin. On Monday, Targa Resources bought two of Outrigger's assets for $1.5B, a deal that included $565M in cash and $925M in "earn-out" payments based on performance. The assets are in the Delaware and Midland Basin regions of the Permian.
Several Houston companies have been making moves in the Permian. Earlier this year, Exxon revealed it was snapping up $6.6B worth of land in the Permian. Last week, Noble Energy announced its own $2.7B deal in the Delaware. Plains All American Pipeline is expanding its 310-mile Cactus Pipeline. Shell is already sitting on 300,000 acres across the region; the company's chief financial officer, Simon Henry, called the region the "crown jewel" of its energy portfolio in the United States.
The reason for the flutter of activity comes down to cost. Though oil has made gains in recent weeks, prices are still too low to resume serious offshore drilling. The cost of extraction is what companies have the most control over, and extraction costs in the Permian are some of the cheapest in the world. Now that oil prices are starting to tick upward, drillers are eager to get to work operating where they have the biggest margins — the Permian. The race is on to tap into what the U.S. Geological Survey says is the largest oil discovery in the United States.
