HOUSTON (Reuters) - Exxon Mobil Corp, the world’s largest publicly traded oil company, on Thursday said it signed two agreements to drill on 48,000 acres in Texas’ Permian Basin, in a transaction that suggests the frozen energy deals market is thawing.
A 60-percent slump in crude oil prices from more than $100 a barrel last summer prompted talk of a wave of deal making in the sector, but up until now, buyers and sellers haven’t been able to agree on valuations.
In recent weeks, however, crude has dipped again to $45 a barrel, a level merger and acquisition lawyers say has spurred seller capitulation.
Exxon is famously conservative and had been mostly sitting on the sidelines, so its tiny purchases may indicate dealmakers believe the crude rout has bottomed.
The two agreements, while quite small, include a purchase and the acquisition of leasing rights from another operator in acreage that adjoins Exxon’s property in two counties. The acreage will be operated by Exxon’s shale drilling unit, XTO Energy Inc.
Exxon has long held that it will only make acquisitions that complement existing holdings where the Irving, Texas oil giant believes it can drive out costs.
On the company’s second quarter earnings call last week, Exxon executive Jeff Woodbury said the company has been able to enjoy a “value uplift” in previous acquisitions in the Permian around its existing operations.
The Permian Basin is one area where Exxon has focused its so-called unconventional exploration where horizontal drilling and hydraulic fracturing are used to pry oil and gas from rocks. Shale wells can be drilled in days and typically provide better returns.
For example, Exxon was able to boost its output from shale by 20 percent from a year ago in the second quarter, the company said last week.
XTO is now operating 11 horizontal rigs and 4 vertical rigs across its 1.5 million-acre Permian position.
Exxon did not disclose its purchase price for the latest two Permian agreements.
The company’s last big purchase was in 2010, when it acquired XTO for $30 billion in the months following a collapse in natural gas prices.
Reporting by Anna Driver; Editing by Terry Wade and Bernadette Baum