After nine months of E&Ps barnstorming the Permian Basin and Oklahoma’s Stack play for deals, the fourth-quarter of 2016 is expected to bring one more round of sorties to the West Texas brush.

What does the fall A&D season hold? Some companies have given glimpses of what they’d like to buy and sell. Potential deals may end up looking a lot like the summer, but surprises are almost a guarantee.

In Texas and New Mexico, M&A fever in the Permian is still causing E&P convulsions. Private companies in the Midland and Delaware may be an irresistible lure to public companies looking for an entry into the world’s hottest play or current residents wanting to expand their position.

Deals could also pop up in large-scale purchases in South Texas, mere 1,000-acre strips in Oklahoma and pieces of the Williston Basin.

Natural gas deals may also be percolating. On Sept. 26, Rice Energy Inc. (NYSE: RICE) agreed to acquire Vantage Energy LLC’s Marcellus acreage in the vaunted Greene County, Pa., core as well as rights to the Utica and Barnett shale plays for $2.7 billion. The Haynesville is also often cited by experts as a gas play with A&D potential.

Related: Rice Energy Makes Dry Gas Run With $2.7 Billion Deal

The Haynesville: Back At The Bottom Of The Well

Seaport Global Securities spoke with several private and public companies and expects some acreage of the private-equity backed companies to get snatched up.

Potential targets include:

  • Silver Hill Energy Partners, with 42,000 net acres in Loving and Winkler counties, Texas;
    • Targeting the Wolfcamp (multiple targets), Avalon Shale, Bone Spring (multiple targets), and Delaware sands;
  • Silverback Exploration, with 38,000 net acres (bids were due in mid-September);
    • At least 30 wells in Reeves County, Texas, producing oil, natural gas and NGL from multiple stacked-pay zones including the Wolfcamp, Bone Spring and Avalon Shale formations;
  • American Resource Development LLC (Ameredev) said at Hart Energy’s 2016 DUG Permian Basin Conference in April that it held 7,460 net acres (90% HBP) in Ward County, Texas; and
    • The company’s production is 1,196 barrels of oil equivalent per day (boe/d), 75% oil.

Diamondback Energy Inc. (NASDAQ: FANG) has its eye on more Delaware Basin acreage after making a $560 million deal in July to buy 19,180 net acres from Luxe Energy LLC.

In announcing the deal, the company said that the entry price into the Delaware was more attractive than recent Midland Basin transactions.

“FANG will likely bias its future M&A efforts toward the opportunity-rich Delaware Basin, where management estimates about 200,000 quality acres are currently on the trading block and held by about 15-20 private E&Ps,” Seaport analysts said.

In Oklahoma, Jones Energy Inc. (NYSE: JONE) is settling in to its newly acquired acreage.

The company said Sept. 27 that it closed its $136.5 million acquisition of 18,000 net acres in the Scoop and Stack plays. The purchase was funded with a portion of the about $152 million in net proceeds from a stock offering.

Separately, on Aug. 26, the company closed a $26.3 million bolt-on deal for Anadarko Basin acreage.

Jones sees its potential M&A opportunities surrounding its new Stack/Scoop acreage, Seaport Global Securities said in a Sept. 20 report. The company has $280 million in liquidity, Jones CEO Jonny Jones said Sept. 19 at the Johnson Rice Energy Conference.

“We do have a scalable Midcontinent footprint. We think with our operating capabilities we can continue to grow this over time as opportunities present themselves,” he said.

Jones added that the Stack/Scoop acquisition gives Jones a 50% working interest in each section. Jones said he hopes to increase the working interest through pooling with other owners. In Oklahoma, only one initial well is permitted in a drilling and spacing unit. Owners who want to propose a well must secure the commitment of other owners in a unit.

The company has engaged 25 title attorneys and 40 brokers working to increase its interests, Jones said.

In conversations with management, Jones’ management said that that several private operators hold about 10,000- or 15,000- acre positions, including Felix Energy.

“Beyond that, JONE sees a number of 1,000-acre packages,” Seaport said. “As for larger players in the play, LINN currently lays claim to about 40,000 net acres.” However, Jones’ management doesn’t believe the company will part with the acreage.

To Market

After its $980 million deal to purchase 24,783 net acres the Midland, SM Energy Co. (NYSE: SM) may be in the mood to sell as it consolidates more territory. With the deal, SM Energy will expand its Midland position to 46,750 net acres.

The company announced the sale of $195 million noncore assets including $172.5 million for holdings in New Mexico and the Williston Basin.

It plans to next sell Eagle Ford nonoperated assets to address funding gaps, though its credit facility can handle any overspend.

Gabriele Sorbara, senior equity analyst for The Williams Capital Group LP, said SM Energy’s Eagle Ford assets could be worth about $750 million.

SM Energy is already marketing 8,468 net acres in the Eagle Ford/Austin Chalk Badger prospect in Lee, Fayette and Washington counties, Texas.

The position includes 64 possible Eagle Ford laterals and 32 possible Austin Chalk laterals, according to The Oil & Gas Asset Clearinghouse, which is handling the negotiated transaction.

Similarly, Tudor, Pickering, Holt and Co. (TPH) sees SM Energy benefiting from the sale of its 44,000 net acre spread in the Raven/Bear Den area in the Williston Basin.

TPH values the asset at about $500 million and said selling them would allow the company to accelerate activity in the Permian.

Parsley Energy Inc. (NYSE: PE), which has announced $1 billion in Permian deals in 2016, may ultimately elect to “spin out” some of its Delaware mineral interests as production volumes increase, Sorbara said.

He also expects the company to continue high-grading its asset base through trades, bolt-on acquisitions and divestiture of low priority assets.

Seaport also said that Clayton Williams Energy Inc. (NYSE:CWEI) is “weighing a divestiture of non-core assets” with the goal of retiring about $500 million of notes to better manage its balance sheet.

The company has about 105,000 net acres scattered throughout the Permian and 170,000 acres in East Texas.

“Additionally, CWEI’s pipeline system in Reeves County has recently registered a high influx of inquiries from interested parties looking to strike a JV [joint venture] to expand the system, an option favored by CWEI given the potential to fetch a higher valuation down the road,” Seaport analysts said.

Darren Barbee can be reached at dbarbee@hartenergy.com.