January 31, 2022 10:15 AM, EST

Earthstone to Buy Permian Oil Producer Bighorn for $860 Million

pump jacks in Permian basinA pumpjack operates on an oil well in the Permian Basin near Orla, Texas. (Daniel Acker/Bloomberg)

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Earthstone Energy Inc. agreed to buy closely held oil and gas producer Bighorn Permian Resources for $860 million, the latest deal to consolidate holdings in the Permian Basin of West Texas and New Mexico.

Formerly known as Sable Permian Resources, Bighorn was part of the late shale pioneer Aubrey McClendon’s empire. The producer went through a contentious bankruptcy process in 2020.

The deal is the latest in a string of acquisitions for Earthstone. In December, it agreed to buy Permian driller Chisholm Energy Holdings, which is majority owned by Warburg Pincus, for $604 million.

Though shale producers have been boosting output at a measured pace following the pandemic-driven plunge in oil production in 2020, drilling in the Permian is recovering at a more rapid clip as crude prices recover. Chevron Corp. said last week that it plans to increase production in the basin by about 10% this year from 2021 levels.

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“Combining the Bighorn acquisition with the four acquisitions completed in 2021 and the pending Chisholm acquisition, we will have more than quadrupled our daily production rate, greatly expanded our Permian Basin acreage footprint and increased our free cash flow, generating capacity by many multiples since year-end 2020,” Earthstone CEO Robert Anderson said in a statement Jan. 31.

Earthstone will pay $770 million in cash and about 6.8 million of its shares for Bighorn. The deal is expected to close in the second quarter.

Johnson Rice & Co. advised Earthstone on its latest deal, while RBC Capital Markets served as financial adviser to Bighorn.