OVV - Smaller Permian producers may see activist campaigns - report

2023-06-06 15:56:52 ET

Small- and mid-cap producers of oil and gas focused on the Permian Basin may become possible activist investors.

Small and mid-cap producers are reluctant to engage in detailed talks, according to a CTFN report on Monday, which cited industry participants and advisors.

Companies with market caps under $10 billion operating in the Permian have recently been offered premiums to enter the takeover discussion, though they have declined to engage, according to CTFN, which cited an industry advisor.

According to the report, smaller companies may be overestimating their prospects, and their boards and managing teams may be hurting their chances of being taken over, so they could become vulnerable to an activist.

Companies with exposure to the Permian with market caps under $10 billion include Ovintiv ( NYSE: OVV ), SM Energy ( NYSE: SM ), Riley Exploration ( NYSE: REPX ), and Ring Energy ( NYSE: REI ).

The report about potential activism in the Permian comes after the WSJ reported in April that Exxon Mobil ( XOM ) held preliminary talks o ver a potential acquisition of Pioneer Natural ( PXD ). Chevron ( CVX ) last month agreed to buy PDC Energy (PDCE ) in an all-stock deal valued at $6.3 billion to get exposure to the DJ Basin.

The Financial Times reported in February that U.S. oil producers are expected to be looking to do deals in the oil patch this year on concern that the best drilling sites are becoming more scarce. The most likely targets are expected to be publicly traded oil and gas producers with market caps of less than $10 billion, according to the report.

More on companies with Permian exposure

• Ovintiv: Shareholder-Friendly Company With Solid Assets
• Ring Energy: Profits Despite A Large Commodity Price Drop
• SM Energy: Solid Production And Cost Performance For Q1 2023
• Riley Exploration Permian:Strongest Relative Strength In U.S. Oil/Gas And Bargain Valuation

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