Yahoo Finance SM Energy (SM) in Advanced Talks to Acquire XCL Resources
SM Energy Company SM is in advanced discussions to acquire XCL Resources, a leading oil and gas producer based in Utah, per a report by Bloomberg.
The potential deal, valued at $3 billion, is expected to be announced in the coming days. XCL Resources is currently backed by EnCap Investments, a private equity firm specializing in the energy sector.
The buyout aligns with a trend of mergers and acquisitions in the oil and gas industry, wherein cash-rich operators seek to expand and rejuvenate their drilling inventories.
By acquiring XCL Resources, SM Energy would significantly extend its operational footprint into the Uinta Basin, an emerging oil and gas field known for producing a unique, waxy type of oil utilized in the manufacture of lubricants. Presently, SM Energy’s primary operations are concentrated in the Eagle Ford and Midland Basins in Texas.
The acquisition would include 45,000 net acres of XCL Resources’ assets in the Uinta Basin, along with daily production rates estimated at 55,000 barrels of oil equivalent. Additionally, XCL Resources owns vital infrastructure for water transportation essential for energy production, which would further enhance SM Energy’s operational capabilities.
If finalized, the transaction would mark another significant exit for EnCap Investments. Earlier this month, EnCap-backed Matador Resources Company MTDR agreed to acquire assets in the Permian Basin for $1.9 billion. The deal included oil and gas-producing properties and undeveloped acreage in New Mexico and West Texas.
XCL Resources, with a minority stake owned by Rice Investment Group, focuses on the acquisition and development of horizontal resource plays within the Lower 48 states. The company's substantial presence in the Uinta Basin positions it as an attractive acquisition target for SM Energy, which aims to diversify and expand its operational areas.
While the deal is nearing completion, no final decision has been made yet. EnCap Investments and other stakeholders of XCL Resources could still decide to retain the company or pursue a different buyer.
The potential acquisition of XCL Resources by SM Energy represents a strategic move to broaden SM Energy's geographical reach and production capabilities, thereby reinforcing its position in the competitive oil and gas sector.
Zacks Rank & Other Stock to Consider
Currently, SM Energy carries a Zacks Rank #2 (Buy).
Investors interested in the energy sector may look at some better-ranked stocks like Archrock Inc. AROC and GeoPark Ltd. GPRK, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Archrock is an energy infrastructure company based in the United States, focusing on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
The Zacks Consensus Estimate for AROC’s 2024 and 2025 EPS is pegged at $1.07 and $1.23, respectively. The company has a Zacks Style Score of A for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
GeoPark, based in Hamilton, Bermuda, is an explorer, operator and consolidator in the oil and gas sector. The company primarily operates in Chile, Colombia, Brazil and Argentina. It has a Zacks Style Score of A for Value, and B for Growth and Momentum.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $3.23 and $3.98, respectively. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.
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SM Energy Company (SM) : Free Stock Analysis Report
Matador Resources Company (MTDR) : Free Stock Analysis Report
Geopark Ltd (GPRK) : Free Stock Analysis Report
Archrock, Inc. (AROC) : Free Stock Analysis Report
