JPMorgan Sells Shale Driller It Picked Up Following Bankruptcy

(Bloomberg) -- JPMorgan Chase & Co. is selling Bighorn Permian Resources LLC, an oil and gas producer it took over in 2020 after the company failed to attract bidders during its bankruptcy, to Earthstone Energy Inc. for $860 million. 

Formerly known as Sable Permian Resources, Bighorn was part of the late shale pioneer Aubrey McClendon's empire. Amid the pandemic-driven collapse in oil prices two years ago, the producer went through a contentious bankruptcy process, where it faced a corporate governance fight with its creditors and struggled to find a buyer for its assets. 

The deal is the latest in a string of acquisitions for Earthstone. In December, it agreed to buy Permian driller Chisholm Energy Holdings LLC, which is majority owned by Warburg Pincus, for $604 million. 

Though shale producers have been boosting output at a measured pace since the 2020 crash, drilling in the Permian is recovering at a more rapid clip as crude prices recover. Chevron Corp. said last week that it plans to increase production in the basin by about 10% this year from 2021 levels.

“Combining the Bighorn acquisition with the four acquisitions completed in 2021 and the pending Chisholm acquisition, we will have more than quadrupled our daily production rate, greatly expanded our Permian Basin acreage footprint and increased our free cash flow generating capacity by many multiples since year-end 2020,” Earthstone Chief Executive Officer Robert Anderson said in a statement Monday.

Earthstone will pay $770 million in cash and about 6.8 million of its shares for Bighorn. The deal is expected to close in the second quarter. Earthstone shares rose 4.2% to $13.80 at 1:38 p.m. in New York, erasing earlier declines.

Johnson Rice & Company LLC advised Earthstone on its latest deal, while RBC Capital Markets served as financial adviser to Bighorn.

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