(East Daley Analytics, 22.Nov.2024) — Coterra Energy (CTRA) is expanding its foothold in the northern Delaware Basin, acquiring assets of Franklin Mountain Energy and Avant Natural Resources in separate agreements valued at $3.95bn. The two deals could put up to 4 rigs in play for midstream companies serving the producers, according to data in Energy Data Studio.
The deals for Franklin Mountain and Avant add 49,000 net acres in New Mexico, CTRA said in a November 13 announcement. The purchases increase CTRA’s core holdings to 83,000 acres in the northern Delaware.
The transactions are the latest in a consolidation wave shrinking the upstream in the Permian Basin. Rig counts have been under pressure as public companies acquire smaller private operators to bolster their drilling inventories and extend development horizons.
East Daley Analytics tracks historical rig and midstream activity for the three producers in Energy Data Studio. Franklin Mountain and Avant each operate 2 rigs in the northern Delaware. Currently, we allocate both of Avant’s rigs to Kinetik’s (KNTK) Durango G&P system, while Franklin Mountain’s rigs are assigned to Targa Resources’ (TRGP) integrated Delaware system (see map).
In Lea County, NM, CTRA processes its gas at Phillips 66 (PSX) and TRGP facilities, and could potentially steer future Avant volumes from KNTK’s Durango system. CTRA CEO Tom Jorden noted the acquired acreage will immediately compete for capital.
RELATED: Coterra Announces Accretive Permian Basin Acquisitions
CTRA executives made no mention of idling rigs after the acquisitions close. But if Coterra opts to idle legacy Franklin Mountain and Avant rigs, it could result in a slight short-term decline in volumes for Kinetik and Targa. However, both G&P systems are highly utilized. KNTK’s Durango system is running at full capacity, according to data in Energy Data Studio, and the upcoming 200 MMcf/d Kings Landing I processing expansion is expected to quickly fill with idled production from a large inventory of drilled but uncompleted wells (DUCs).
As for Targa, EDA is currently tracking 37 rigs drilling on the company’s integrated Delaware G&P system. The massive TRGP footprint services ~25% of all Delaware Basin rigs, so losing 2 rigs would not make a material difference in short-term volumes.
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By James Taylor
