TheChek News Flow

The Amazon founder’s $68 million Indian Creek purchase is among the priciest deals to close in the South Florida city in recent years

Agreement comes amid return of M&A in upstream oil and gas sector as cash-rich producers search for drilling sites

US shale operator Permian Resources announced on Monday it will buy Earthstone Energy in an all-share transaction valued at $4.5bn including debt, as dealmaking picks up among upstream producers in search of better inventory.

The acquisition of the oil and gas producer will strengthen Permian’s operations in the Texas shale patch and in New Mexico, increasing its assets by more than 400,000 acres and production by 70 per cent to 300,000 barrels of oil equivalent per day.

The deal will consist of 1.446 shares of Permian’s common stock for each of Earthstone’s common stock.

The announcement comes as the flow of mergers and acquisitions returns to the upstream oil and gas sector, with producers sitting on record levels of cash looking to shore up more drilling sites. 

US upstream M&A activity reached $24bn in the second quarter, up 167 per cent from a slow first quarter and the highest since 2021, according to Enverus. The energy research firm tracked 20 deals in the second quarter, with more than a quarter of them topping $1bn. 

Andrew Dittmar, director of Enverus, said the need for public buyers to secure quality drilling inventory in the Texas shale patch had been “brewing”. “The pressure to make a deal has been mounting as the remaining opportunities are narrowed with each successive transaction,” he said.

Chevron’s $6.3bn purchase of Nasdaq-traded PDC Energy in May, one of the largest deals during the second quarter, boosted the supermajor’s oil and gas reserves in Colorado.

Chevron’s and Permian’s acquisitions deviate from the dominant dealmaking route of public companies pursuing private-equity backed operators. The deals suggest that public company acquisitions will become more common as private operators with attractive valuations and large inventories become harder to find.

“It’s a race to consolidate the Permian,” said Matthew Bernstein, shale analytics manager at Rystad Energy, an energy consultancy. He added: “As far as a real large public-to-public merger goes [in the Permian], this is something we haven’t seen yet so far this year.”

The acquisition of Earthstone is expected to propel Permian into the top ten producers in the prolific Texas shale patch.

Shares in Earthstone jumped more than 9 per cent in pre-market trading on Monday, while those of Permian were down 3.4 per cent.

US crude oil and dry gas production are expected to reach record highs this year, according to the Energy Information Administration. While output is rising, growth is decelerating as drilling sites become harder to find and public operators prioritise shareholder returns over capital spending.

Annual US crude production will grow by 850,000 barrels per day in 2023, according to the EIA, down from the record 1.6mn b/d production increase seen between 2017 and 2018

Poor water quality of French river has cast doubt over games next summer

The Paris Olympics organisers have vowed to redouble efforts to clean up the Seine river after several test events were cancelled this weekend because of pollution, raising doubts over swimming plans for next summer’s games.

Athletes in the World Triathlon Olympic Games test event swam in the Seine on Thursday and Friday, but competitions scheduled for Saturday and Sunday were scrapped because water quality tests showed “significant discrepancies”, including higher than acceptable levels of E. coli bacteria, according to organisers. Instead of complete triathlons, the athletes did a duathlon of running and biking.

The decision was another setback to the city’s ambitions to reopen the Seine river to host two long-distance races and the swimming legs of the triathlon for the summer Olympics next year.

To prepare, Paris has embarked on a major clean-up and infrastructure upgrade that will cost €1.4bn, which includes new underground pipes, tanks and pumps to prevent sewage and pollutants from overflowing into the river when it rains heavily.

Tony Estanguet, the president of the Paris 2024 organising committee, told RMC radio on Sunday that “excellent improvements” to the river water quality had already been made and would continue “month by month”. “We are quite calm about next year,” he said.

Paris mayor Anne Hidalgo has also backed the effort to make the Seine swimmable again as a key legacy of the Olympics that will benefit city residents as summer temperatures rise because of climate change.

In early July, she announced the first three swimming sites scheduled to be opened to the public in 2025, and the goal is to eventually have about 20 sites in the Paris region and its suburbs. “It is a dream that will become reality for Parisiens,” she said at the time.

City officials were not able to immediately identify the reasons for the poor water quality on Saturday, and it had not rained much in the area in recent days. In early August, another test event was cancelled because heavy rains caused overflows of untreated waste in to the river.

The concentration of E. coli bacteria in the water on Saturday was found to be slightly above the allowed levels, said an official from the Paris mayor’s office.

Incidents of athletes falling ill after swimming in polluted water have marred recent triathlons. According to UK health officials, 88 people who took part in a British triathlon even in Sunderland in late July reported experiencing diarrhoea or vomiting after the event.

Estanguet, who won three gold medals in canoe slalom competitions, said much had been learned during the test events last week in Paris, even though some had to be cancelled. “We still have a year and during the games we can reschedule the events if needed,” he said on RMC radio.