Good morning; Here's what the Oilman has for you today:

• Another Billion-Dollar Takeover in the Permian

• Latest Oil Price Dip is Misleading

• Upcoming Oil and Gas Events

• Tweet of the Day

Another Billion-Dollar Takeover in the Permian

Permian Resources Corp. has agreed to buy Earthstone Energy for $2 billion in an all-stock deal.

The transaction values Earthstone at $4.5 billion.

It’s consolidation time

Takeovers have become a preferred way for shale operators of means to grow their business.

Permian Resources Corp. is a prime example.

The relative newcomer on the shale scene has grown primarily through takeovers.

Some believe this taste for takeovers comes because operators are running out of the sweetest drilling spots.

Others see M&As as a quicker way to grow, especially amid higher prices.

These need to be taken advantage of right now while they last.

So, to take that advantage, Permian Resources paid $2 billion in stock to add 300,000 boed to its pro-forma output.

Not bad for a newbie that’s not even 10 years old.

Not bad at all since those 300,000 boed represent a 70% increase in Permian’s current production.

From no M&As to a 167% jump in deals

Last year, analysts seemed concerned that there were not enough mergers and acquisitions in the shale patch.

Oil producers were sitting on piles of cash from the price spike and returning it to shareholders.

The cheeks.

Yet, as always, it was only a matter of time for deal-making to return to the scene.

In the second quarter of this year, M&A activity in the shale patch soared by 167% on the year.

And it will soar further.

“The pressure to make a deal has been mounting as the remaining opportunities are narrowed with each successive transaction,” per Andrew Dittmar from Enverus.

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Latest Oil Price Dip is Misleading

Oil prices recently snapped a seven-week string of gains.

Anyone thinking this means we have a well-supplied market, however, does so at their own risk.

It was never about supply

For months earlier this year, prices remained subdued.

It wasn’t because there was enough oil.

It was because economic data from the biggest consumers was discouraging.

And then the Saudis started cutting production.

Everyone remembered the oil equation also has a supply side.

Prices spiked.

Then, as economic data from China continued to be discouraging, the spike flattened.

But here’s the thing: supply has not gone up.

So analysts are warning of an undersupply.

Only more pain can keep prices low

Make no mistake; Economic data will continue to be the top priority for traders.

Even with ample evidence, it is not a sufficiently accurate gauge of future oil demand.

China’s had some disappointing readings, yet demand for oil has remained near records.

Demand remains healthy in troubled Europe, too.

The string of U.S. inventory declines in recent months suggests a similar situation here as well.

So yeah, prices are down now, but it won’t last.

Especially if the Saudis decide to extend their cuts.

Which they likely will.

Because Bloomberg just reported Iran’s oil exports may have topped 2 million bpd this month.

Upcoming Oil & Gas Events

• August 23-25: Rockies Petroleum Conference, Marian H Rochelle Gateway Center, Laramie WY PAW

• August 28: SOOGA Fall Golf Outing, Oxbow Gold Course, Belpre OH

• August 28-September 1: International Meeting for Applied Geoscience and Energy Houston TX

• August 31: ND Oil PAC Golf Tournament Bully Pulpit Golf Course, Medora ND

Around the Global Patch

🇺🇸 Norwegian gas output misses forecasts, despite the July rebound.
🇨🇳 Rekindling China's thirst for Saudi Oil, a look ahead.
🇷🇺 Luna-25's crash dashes Russia's space ambitions.

Tweet of the Day

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