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OXY-CrownRock Tie-up a Bad Omen for Permian Rigs

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Active rigs in the Permian Basin have declined by 69 rigs (-19%) so far in 2023, mostly as a result of rig reductions following mergers and acquisitions (M&A) in the past 12-18 months. A rumored deal between CrownRock and Occidental Petroleum (OXY) would likely contribute to this down trend.

The Wall Street Journal reported on talks between OXY and the private producer. CrownRock is one of the top 5 private E&Ps by rig count in the Permian Basin, so a potential acquisition by OXY could slow future production growth on its acreage. CrownRock operates more than 100 Mb/d of crude oil production in the Midland Basin and production has increased at a 21% CAGR over the past 5 years, according to supply data in Energy Data Studio (see figure).

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East Daley recently reviewed rig activity by Permian producers involved in M&A, either as buyers or sellers, and found rig counts by the group had declined by nearly 30% in 2023. While ExxonMobil’s (XOM) $60B purchase of Pioneer Natural Resources (PXD) could buck the trend, mergers on balance have been a negative indicator for future supply.

In our upcoming Dirty Little Secrets annual report, East Daley will feature an analysis of how future E&P consolidation could impact production growth in the Permian Basin vs our base case forecast. – Ryan Smith Tickers: OXY, PXD, XOM.




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