April 16, 2019

Chevron’s acquisition of Anadarko may have signaled the beginning of a consolidation wave about to hit the oil-rich Permian Basin region. Many experts anticipate that more fossil fuel “giants” will move to purchase independent producers who are struggling with cash flow, hampering their ability to develop their acreage.

Other giants that could initiate acquisitions include Royal Dutch Shell, BP, and Exxon. Several publicly traded independent producers have been mentioned as potential acquisition targets for oil companies eager to expand their operations in the Permian region.

Don Jackson, Partner in the Oil & Gas/Energy Litigation Practice Group, discussed the signs that have led many to describe the Permian Basin as becoming a “mature oil and gas production hub.”

“When there's a new asset play, the first step is acreage acquisition. The second step is some development to prove it up and optimize it, and the third step is consolidation, where efficiency is most important,” said Don. “We seem to be either in that third area or entering that third area, where consolidation makes a lot of sense.”

Don also noted that many large firms with M&A practices have positioned themselves for transaction work opportunities, setting up shop in Houston and other Texas cities in the last few years.

“That could prove to be a very wise investment if this M&A work picks up because of consolidation in the Permian,” Don said.

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