S&P eyes Earthstone, Permian positively

S&P said it placed its ratings for Earthstone Energy Inc. and Permian Resources Corp. on CreditWatch with positive implications.

On Monday, Earthstone and Permian Resources announced that Permian Resources agreed to buy Earthstone for about $4.5 billion, including debt, in an all-stock deal. The transaction is expected to close by the end of 2023, subject to regulatory and shareholder approvals.

“The pro forma company will have approximately 400,000 net acres in the Permian Basin, production of about 300,000 barrels of oil equivalent per day (boe/d), and a significant increase in reserves, making its scale consistent with higher-rated peers. Our forecast for leverage of about 1x at year-end 2023 supports the rating action. Additionally, we expect this transaction to provide for considerable cost savings and allow for increased economies of scale,” the agency said in a statement.

The positive watch reflects the potential for an upgrade for both companies once the deal closes, S&P said.

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