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$300 million Permian Basin oil and gas sale closes as company exits Eagle Ford

Callon Petroleum completes $300M sale in the Permian Basin, focusing on production growth. Permian Basin, oil and gas, asset sale.

Story By Adrian Hedden, |Carlsbad Current-Argus, via Yahoo News| A $300 million sale of oil and gas assets on the western edge of the Permian Basin closed last week as the shale region continues its rise in production.

ASSET SALE: Callon Petroleum Company of Houston said it closed on the acquisition of assets in the Delaware sub-basin from Percussion Petroleum Operation on July 5, a sale announced in May that said the company refocus its extraction efforts on the Permian.

Callon also sold off about $655 million worth of assets in the Eagle Ford region of southern Texas to Ridgemar Energy Operating, as Callon sought to divest of other basins and shift to a “singular focus” on West Texas and southeast New Mexico.

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The Eagle Ford assets were on about 52,000 acres, producing about 16,300 barrels of oil equivalent per day (boed), at 71 percent oil.

The Permian Basin purchase increased Callon’s Permian footprint to about 145,000 acres, along with 1,500 drilling locations.

That meant adding about 18,000 acres in Ward, Winkler, and Loving counties in Texas, along its border with New Mexico, and 70 new well locations.

The assets were estimated to produce about 14,100 boed, at about 70 percent oil.

Callon Chief Executive Officer Joe Gatto said the move would improve shareholder returns as the company now operated exclusively in the Permian Basin.

“Through these two transactions, we have created a singular focus on the Permian Basin, reduced our absolute debt position, and kicked off a shareholder return plan,” Gatto said. “The bolt-on Percussion transaction improves our Delaware inventory depth and also lowers our cost structure.”

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Gatto said that by exiting the Eagle Ford, Callon was able to fund its acquisitions in the Permian Basin, the busiest and fastest-growing oil and gas region in the U.S.

“Our strategic Eagle Ford exit funds our Delaware expansion and focuses our people, capital, and operations on our premium Permian position,” he said. “The combined transactions strengthen our capital structure, improve our margins, and lengthen our top-tier Permian inventory.”

Some of the most productive operations in the Permian Basin were across the border in southeast New Mexico, as Eddy and Lea counties were recently found to produce almost a third of the region’s oil in the first quarter of 2023, according to a report from the Energy Information Administration (EIA).

The two counties averaged about 1.7 million barrels per day (bpd) together during that same time period, about 29 percent of the output reported from all 66 counties in the region.

Overall, the Permian was estimated at about 5.7 million bpd of oil as of March, the EIA reported, climbing from 5.3 million bpd in 2022 and 4.7 million bpd in 2021.

In the first quarter of 2023, Eddy and Lea counties accounted for 28 percent of the Permian’s natural gas production.

Natural gas production in the Permian also climbed to a new annual high of 21 billion cubic feet per day bcf/d, the EIA reported, mostly from gas brought up with oil.

This “associated natural gas” almost doubled since 2021, read the report, increasing to 6.5 bcf/d in 2022 from about 3.7 bcf/d in 2021.

Horizontal wells in Eddy and Lea counties accounted for 60 percent of the total growth in the region in Q1 2023, up from 44 percent in Q1 2022.

“In southeastern New Mexico, horizontal wells in Lea and Eddy counties drove much of the recent growth in Permian Basin crude oil output,” the report read.

More production in oil and gas followed increased drilling rigs of both commodities in the Permian and in Texas and New Mexico.

The two Permian Basin states had the first- and second-highest rig counts in the U.S., with Texas dropping four rigs in the last week for a total 337 rigs and New Mexico adding three rigs for its total of 111 rigs as of Friday, according to Baker Hughes.


Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.

This article originally appeared on Carlsbad Current-Argus: $300M Permian Basin oil and gas sale closes, company exits Eagle Ford  Keyword Topics: Permian Basin, oil and gas, asset sale.

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