Diversified Energy negotiations to acquire are progressing Birch Resources, an oil and gas producer with operations in the Permian Basin, backed by Elliott Investment Management, for more than $1.7 billion in cash.
According to people familiar with the discussions, the company is emerging as the likely winner of a competitive sale process. The deal could be announced in the coming weeks, although the parties have not yet made a final decision.
Diversified Energy expands its presence in the Permian Basin
Birch Resources currently maintains operations in the Permian Basin the main oil-producing region in the United States. An acquisition would allow Diversified Energy to increase its exposure to an area that holds some of the country’s most important hydrocarbon assets.
However, negotiations remain open, talks could end without an agreement, another buyer could appear, or the planned timeline for the transaction could be modified.
For now, Elliott Investment Management declined to comment, while representatives from Diversified Energy and Birch Resources did not offer an immediate response regarding the negotiations.
The potential sale of Birch Resources would benefit Elliott
On the other hand, a transaction exceeding $1.7 billion would represent a significant exit for Elliott and the investors who took control of the assets that later formed Birch.
The investment dates back to 2018, when a group of investors acquired the assets from Breitburn Energy Partners. This oil and gas company had experienced financial difficulties following the collapse in crude oil prices.
Elliott was a creditor of Breitburn and used that position to acquire control of significant assets in the Permian Basin, along with other investors. The group subsequently capitalized the business with approximately $775 million.
Furthermore, the potential sale reveals another facet of Elliott’s strategy, the firm is known for its activist investments, but it also uses its expertise in debt markets to invest in struggling companies or assets and seek an exit when market conditions improve.
The operation would continue the expansion of Diversified Energy
Furthermore, the acquisition of Birch Resources would continue a period of significant acquisitions for Diversified Energy. The company acquired Maverick Natural Resources for $1.3 billion last year. That transaction already increased its position in the Permian Basin.
More recently, Diversified Energy and Carlyle Group closed a $1.2 billion deal in May related to Camino Natural Resources, a producer with operations in Oklahoma.
A purchase of Birch for more than 1.7 billion would exceed both figures and reinforce the growth strategy through acquisitions of oil and gas assets.
Acquisitions are gaining importance in the oil and gas sector
Meanwhile, the negotiation comes at a time of intense corporate activity within the energy industry, fueled by the behavior of the oil prices and gas.
In July, Magnolia Oil & Gas agreed to acquire WildFire Energy for approximately $4.1 billion, including debt, Matador Resources also reached an agreement to purchase Permian Basin assets from EnCap Investments for about $1.3 billion.
If completed, the purchase of Birch Resources would add another multi-million dollar transaction to this consolidation process and increase Diversified Energy’s presence in one of the main hydrocarbon production centers in the United States.
Source: Energy Now
Photo: Shutterstock
