Earthstone Energy shares jump 15% on Permian Resources deal

August 22, 2023 12:03 AM AEST | By Invezz

Earthstone Energy shares jump 15% on Permian Resources deal — Image source: Invezz

Why is Permian Resources buying Earthstone Energy?

Permian Resources expects this all-stock transaction to help expand its footprint in the Permian basin. Will Hickey – its Co-CEO also said today in a press release:

The acquisition represents a compelling value proposition for our shareholders and strengths our position as premier Delaware Basin independent E&P.

The said deal values each Earthstone Energy share at about $18.64.

On Monday, Permian Resources also revealed plans of raising its quarterly dividend to 6 cents – a 20% increase applicable from the first quarter of 2024. Its shares opened roughly flat this morning but are up a whopping 45% year-to-date.

Permian Resources expects an increase in free cash flow

Permian Resources is convinced that buying Earthstone Energy will boost its free cash flow on a per-share basis by more than 30% over the next two years. According to CEO Hickey:

Earthstone’s Northern Delaware position brings high-quality acreage with core inventory that immediately competes for capital within our portfolio.

The benefit to free cash flow will sit at over 25% over the next five to ten years, he added. Wall Street currently rates Earthstone Energy shares at “overweight”.

Permian and Earthstone have identified annual synergies worth about $175 million, as per the press release. The agreement will likely complete before the start of 2024 provided that it meets customary closing conditions, including regulatory and shareholders’ approval.

The post Earthstone Energy shares jump 15% on Permian Resources deal appeared first on Invezz.

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