From Bloomberg
China’s Yantai Xinchao Industry Co. is pursuing U.S. oil acquisitions worth as much as $1 billion in the Permian Basin, and it won’t be satisfied letting others run the show, according to the head of the company’s U.S. subsidiary.
Unlike other Asian companies that bought stakes in U.S. energy prospects in recent years, Xinchao is seeking so-called operated positions, or deals that give it primary authority over everything from how deep to drill to how intensively to frack each well, said Curtis Newstrom, chief executive officer of Blue Whale Energy North America Corp., the U.S. arm of the Shanghai-listed company.
Houston-based Blue Whale made a splash last year with its first two deals on behalf of its Chinese parent, a company virtually unknown in U.S. exploration circles: a $315 million acquisition of drilling rights across 7,100 acres from Juno Energy II in April 2015 and a $1.1 billion transaction in November with Tall City Exploration LLC and Plymouth Petroleum LLC. Both deals involved Texas oil fields. It is now on the search for other assets valued at between $500 million and $1 billion, he said.
Texas Competition
Xinchao and Newstrom are up against some stiff competition in trying to expand their portfolio in the Permian basin of West Texas and New Mexico. International heavyweights and domestic titans from Exxon Mobil Corp. to Occidental Petroleum Corp. have been ramping up acquisition efforts in the region at a breakneck pace.
Drilling rights in the richest part of the region have been commanding selling prices as high as $35,000 an acre, reminiscent of the height of the shale land grab half a decade ago, according to Mike Winterich, president of Three Rivers Operating Co III LLC, an Austin, Texas-based Permian oil explorer backed by private equity giant Riverstone Holdings LLC.
Private equity firms are also scouring the Permian Basin for acquisitions, heightening competition for relative newcomers such as Blue Whale, which was formed in 2014. More than 100 private equity firms have teams evaluating potential Permian transactions, Winterich said during a presentation at the Hart Energy event on Tuesday.
