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Diamondback Energy (FANG) may emerge as a potential suitor alongside Occidental Petroleum (NYSE:OXY) for Permian Basin oil producer CrownRock, Citi said Friday, adding competition for the assets could lead to a bump in the reported $10B deal value.
New bidders for CrownRock would be led by Diamondback (FANG), "who discussed M&A prospects on its most recent conference call and the company has been active in consolidating within the northern Midland," Citi's Scott Gruber wrote.
The analyst also sees ConocoPhillips (COP) as a potential bidder given the company's Midland position, but believes "competition for the asset, limited adjacent acreage, and a strong Permian position pushes down the likelihood" of it purchasing CrownRock.
Separately, assuming an $11B price tag, an Occidental (OXY) deal for CrownRock would imply a value of at least $73K per flowing boe/day, which "looks steep compared with other moderately sized Permian deals inked this year," WSJ Heard On The Street's Jinjoo Lee wrote.
According to Lee, Ovintiv (OVV) agreed earlier this year to pay ~$65K per boe/day for Permian assets from Encap, and Civitas Resources' (CIVI) Permian deal this year implied a $47K per boe/day valuation, citing estimates from energy investment firm Bison Interests.
Lee noted Exxon Mobil (XOM) is paying $91K boe/day for Pioneer Natural Resources, although Exxon arguably was paying up for Pioneer's vast undeveloped acreage, which the per barrel metric does not capture.
"Still, the shrinking pool of acquisition targets and the market's discount on small producers should provide enough motivation for consolidation," Lee wrote.