Opening Comments -- November 6, 2021

Updates

January 14, 2022: update on the CLR Permian deal. Link here.  On a total sales price divided by lease acreage, Continental will pay about half the acreage price that Pioneer paid for its acquisition. Archived.

December 22, 2021: deal closes. Link here.  

Assuming 100% of the purchase price adjustment of $125M was generated in free cash flow from the asset over the ~11 week period, would indicate the asset is generating ~$600m a year in free cash flow annually at current commodity prices; or around 20% of the purchase price.

Original Post 

The announcement that CLR was entering the Permian in an all-cash $3.25 billion deal was a tectonic event for the US shale industry. 

This site will be about that deal and how it plays out.

November 4, 2021: where this story is followed at the MillionDollarWay (The Bakken Blog).

The CLR Permian Gambit

On November 4, 2021, CLR announced a $3.250 billion deal, to be paid in cash, with no stock dilution, to acquire certain Delaware assets in the Permian Basin from PXD. 

I have zero understanding of the Permian Basin and after more than a decade of blogging about the Bakken, I probably understand five percent of what there is to know about the Bakken. I do not have time to follow the Permian to the extent that I follow/followed the Bakken. Not even close.

The purpose of this blog is to simply follow, what I call, the "CLR's Permian Gambit." 

This is absolutely huge. 

Let's start with this one statement: CLR is entering the Permian, paying another competitor $3.25 billion in cash, for 92,000 net acres. More on that later. There is no CLR stock diluton.

The question, of course, on everyone's mind is whether this will work for CLR. 

For me, I have no doubt it's going to work.

That's purely emotion, not based on reason or any meaningful rational analysis of the deal.

Harold Hamm owns 90% of the outstanding CLR stock (see disclaimer above). That's why I believe this deal is going to work.

I waffled on Vicki Hollub and OXY, a huge mistake on my part. See my note posted on April 22, 2019. Subsequently, the OXY - Anadarko deal and I bailed; huge mistake. 

Disclaimer: I "traded" OXY, never invested in it for the long term, and do not hold any OXY now. I have no plans to start a position in OXY. I have probably traded in CLR in the distant past, but I honestly forget. I could check my records, but have no reason to do so. I don't own -- directly -- any shares in CLR and have to plans to start a position in CLR.  Although that could change down the road. "Down the road" means not sooner than six months. The road ahead of me is fairly long. I have hitchhiked four times across the US (a bit of hyperbole, but not much) so I know what long roads look like. 

So, with those introductory comments and disclaimers, let's get started. Let's go, Brandon!

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Disclaimers

Disclaimer: the most important note about this blog, as with all my blogs, I intersperse facts (generally linked to source) with factoids (whatever they are, and unlinked), observations, and opinions in almost every post. It is pretty much impossible to separate fact from fiction on my posts/blog, but I have no hidden agenda (generally speaking). What I post is my world view. I often misread things and I often miss something when reading. And so I make mistakes. I correct them when I find them. I am doing this simply for my benefit to help me better understand the Bakken revolution (a metonym). This is not for the general public and I prefer that no one else read the blog. But I post it publicly for a number of reasons which I may or may not explain later. If one does read the blog, feel free to comment (comments are heavily moderated). 

Disclaimer: this is not an investment site, but I often use "investment" sources. I have found that to better understand almost any subject, one must follow the money. That is most true when it comes to oil. Do not use this blog as a source of investment advice. 

Disclaimer: I have no formal background, training, or education in "oil" or business, at any level. 

Disclaimer: One can assume there will be content and typographical errors in every post on this blog. Please do not alert me to minor errors, such as minor spelling errors, but if there is a major error, please let me know as quickly as possible. The #1 typographical error on my blogs is typing "not" for "now" or vice versa. That's a biggie. Let me know immediately if you catch such an error. 

Disclaimer: I have no resources to do statistical analysis or in-depth analysis of any kind. My analysis is incredibly superficial.

Disclaimer: I am inappropriately exuberant about the Bakken revolution. Let's go, Brandon!