Coterra Energy Inc has announced it has entered into two separate definitive agreements to acquire certain assets of Franklin Mountain Energy and Avant Natural Resources and its affiliates for aggregate consideration of US$3.95 billion, consisting of US$2.95 billion of cash and US$1.0 billion of Coterra common stock, issued to one of the sellers, subject to certain purchase price adjustments.
The cash portion of the consideration is expected to be funded through a combination of cash on hand and borrowings. The transactions are each subject to satisfaction of customary terms and conditions and are expected to close during 1Q25, with effective dates as of 1 October 2024. Neither acquisition is conditioned on the closing of the other acquisition.
Tom Jorden, Chairman, CEO, and President of Coterra, noted, “We are thrilled to announce the pending acquisition of two high-quality Permian Basin asset packages. These highly accretive acquisitions create an expanded core area in New Mexico that plays to Coterra’s organisational strengths. In addition to adding significant oil volumes in 2025, the acquired assets provide inventory upside to established and emerging oil-weighted formations.”
Mr. Jorden continued, “We have been drilling horizontal wells in Lea County, New Mexico since 2010 and are extremely excited with the recent results and future opportunity across the area. The newly scaled platform provides a long runway for capital efficient development and substantial free cash flow generation. Importantly, we are maintaining an industry-leading balance sheet.”
Assets to be acquired include 400-550 net Permian locations, primarily targeting Bone Spring, Harkey, Avalon and the emerging oily Lower Wolfcamp/Penn Shale. Assets to be acquired are expected to generate 1.8x PVI 10 on average, at US$70/bbl WTI and US$3.00/million Btu NYMEX price assumptions. The acquisition increases Coterra’s New Mexico net locations by approximately 75%, and Coterra’s Permian net locations by approximately 25%, with an average lateral length of 9500 ft.
Coterra is acquiring approximately 125 miles of pipeline and other infrastructure, which is expected to enhance netbacks and economics across existing acreage and the new focus area. Multiple horizons and contiguous drilling spacing units will help maximise wells per pad, reduce facilities and infrastructure costs.
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