Coterra Energy expanded its grasp in the Permian Basin with a nearly $4 billion acquisition of assets of Franklin Mountain Energy and Avant Natural Resources. The company anticipates a nearly large increase in its 2025 oil production as a result.
Tom Jorden, Chairman, CEO, and President of Coterra, noted, “These highly accretive acquisitions create an expanded core area in New Mexico that plays to Coterra’s organizational strengths. In addition to adding significant oil volumes in 2025, the acquired assets provide inventory upside to established and emerging oil-weighted formations.”
The acquisitions mean another 49,000 continguous acres n the northern Delaware Basin of Lea County, New Mexico. As a result, it created a new approximately 83,000 acre focus area within the Coterra portfolio. The acquired assets include 400-550 net Permian locations primarily targeting Bone Spring, Harkey, Avalon and the emerging oily Lower Woldcamp/Penn Shale.
“We have been drilling horizontal wells in Lea County, New Mexico since 2010 and are extremely excited with the recent results and future opportunity across the area. The newly scaled platform provides a long runway for capital efficient development and substantial free cash flow generation. Importantly, we are maintaining an industry-leading balance sheet,” added Jorden.
The cash portion of the consideration is expected to be funded through a combination of cash on hand and borrowings. The transactions are each subject to satisfaction of customary terms and conditions and are expected to close during the first quarter of 2025, with effective dates as of October 1, 2024. Neither acquisition is conditioned on the closing of the other acquisition.
Coterra will fund the acquisitions with $2.95 billion of cash and the issuance of approximately 40.9 million shares of Coterra common stock to certain sellers, which is valued at approximately $1.0 billion. The Company plans to finance the cash portion of the purchase price through a combination of cash on hand and new borrowings.
The acquisitions also include approximately 125 miles of pipeline and other infrastructure along with multiple horizons and contiguous drilling spacing units.
Coterra stated in the announcement it estimates 2025 oil production of 150-to-170 mbod will increase nearly 49% compared to estimated 2024 mid-point of oil guidance. Standalone Coterra assets are expected to generate 5-10% growth in 2025.