Earthstone Energy (NYSE:ESTE) stock jumped after news of its premium-priced, US$4.5 billion takeover by US shale peer Permian Resources (NYSE:PR).
The paper deal, pitched at US$18.64 per Earthstone share, aims to create a new ‘premier Delaware basin independent E&P company’ producing around 300,000 barrels oil equivalent per day.
It promises to unlock US$175 million of synergies, and, is forecast to see the combined firm improve free cash flow by some 30% over the next two years.
“We are very pleased to announce this transaction with Permian Resources and believe the combination of the two companies’ top-tier assets and history of success will create an even stronger large-cap E&P company which is uniquely positioned to drive profitable growth and development in the world-class Permian Basin,” said Earthstone chief executive Robert Anderson.
“We believe this all-stock transaction provides Earthstone’s shareholders with excellent value for their investment now and in the future.”
Permian co-chief executive Will Hickey, meanwhile, added that the deal “represents a compelling value proposition”.
Hickey added: “Permian Resources has a proven integration track record, and we believe the successful execution of these cost savings will create incremental value for both Permian Resources and Earthstone stakeholders.”
In New York, Earthston stock is up US$1.46 or 9% changing hands at US$17.69 per share.
Permian stock was down 3.4% trading at US$12.45 in premarket deals.