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VNOM $4.1B Deal Echoes Permian Appeal: Time to Watch EPD & OXY too?
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Key Takeaways
VNOM is acquiring Sitio Royalties for $4.1B to expand its Permian footprint to 85,700 net royalty acres.
The deal affirms Permian profitability, with VNOM projecting an output of up to 130,000 BOE per day by 4Q25.
With activity in the Permian gaining momentum, this can signal a promising business outlook for EPD and OXY.
Viper Energy, Inc.’s (VNOM - Free Report) decision to buy Sitio Royalties is making headlines — not just because it is a major deal but because of what it reveals about the oil market. The agreement underscores that even though crude prices have declined since the beginning of the year, operations in the prolific Permian Basin remain profitable.
With activity in the Permian gaining momentum, does this indicate a promising business outlook for midstream players like Enterprise Products Partners LP (EPD - Free Report) and producers like Occidental (OXY - Free Report) ? Let us find out.
Viper Energy’s $4.1B Deal to Strengthen Permian Position
VNOM, currently carrying a Zacks Rank #3 (Hold), is acquiring Sitio Royalties in an all-stock deal worth $4.1 billion to strengthen its position in the Permian Basin. In the Permian, Sitio Royalties has roughly 25,300 net royalty acres, resulting in the combined firm’s presence in the most prolific basin at 85,700 net royalty acres.
With the acquisition likely to be complete by the third quarter of this year, VNOM expects to produce 122,000-130,000 barrels of oil equivalent per day in the fourth quarter of 2025. For 2026, Viper Energy forecasts mid-single-digit percentage growth in average production from the fourth quarter of 2025, suggesting confidence in the long-term profitability of its Permian assets.
Does the Deal Signal Permian Basin’s Appeal Amid Oil Slump?
This aggressive move comes despite a slump in crude prices. According to data from the U.S. Energy Information Administration, the average Cushing, OK, WTI spot prices declined to $62.17 per barrel in May from $75.74 per barrel in January this year. The price downturn and broader energy market uncertainty, in part due to geopolitical tensions such as the U.S.-China trade conflict, have generally slowed mergers and acquisitions across U.S. shale regions.
Yet, VNOM’s acquisition underscores the enduring attractiveness of the Permian Basin. This is primarily because of low break-even costs. According to Statista, a leading platform for data collection and visualization, the break-even price in the Permian Basin, especially in the Delaware and Midland sub-basins, is well below $40 per barrel. Thus, even though WTI oil is currently trading below $65 per barrel, operations in the Permian are highly profitable.
Are Permian Players Now in the Spotlight?
Given the context, it is evident that exploration and production activities in the Permian are gaining momentum. As oil volumes rise, the need for midstream infrastructure, including pipelines and storage facilities, will also grow to accommodate the increased production.
This trend bodes well not only for oil producers in the region but also for midstream companies facilitating transportation and storage. As a result, investors should closely monitor key players with significant Permian exposure.
2 Must-Watch Stocks: OXY & EPD
Low-Cost Inventory in the Permian Secures OXY’s Profitability
In the Permian Basin, Occidental’s operations are spread across 2.9 million net acres, making it among the largest acreage holders in the United States. OXY, with a Zacks Rank of 3, has 6,300 high-quality development locations with break-even costs of below $50 per barrel, with the majority of the locations in the Permian. Occidental also has 3,600 key locations, again mostly in the most prolific basin, having a break-even of less than $40 per barrel. Thus, Occidental’s overall operations are profitable, considering the pricing environment of crude oil.
Enterprise Products has a strong presence in the Permian Basin, the most prolific basin in the United States, as its customers are primarily large upstream and integrated oil and gas companies.
On its recent earnings call, the partnership stated that last year, it connected more than 1,000 new oil and gas wells, most likely primarily from the Permian Basin, although this was not explicitly confirmed, to its pipelines and processing plants. The #3 Ranked partnership expects a similar number this year. However, most of these new connections are planned for the second half, which means that the largest increase in activity and earnings from these wells is likely to come later in 2025.
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VNOM $4.1B Deal Echoes Permian Appeal: Time to Watch EPD & OXY too?
Key Takeaways
Viper Energy, Inc.’s (VNOM - Free Report) decision to buy Sitio Royalties is making headlines — not just because it is a major deal but because of what it reveals about the oil market. The agreement underscores that even though crude prices have declined since the beginning of the year, operations in the prolific Permian Basin remain profitable.
With activity in the Permian gaining momentum, does this indicate a promising business outlook for midstream players like Enterprise Products Partners LP (EPD - Free Report) and producers like Occidental (OXY - Free Report) ? Let us find out.
Viper Energy’s $4.1B Deal to Strengthen Permian Position
VNOM, currently carrying a Zacks Rank #3 (Hold), is acquiring Sitio Royalties in an all-stock deal worth $4.1 billion to strengthen its position in the Permian Basin. In the Permian, Sitio Royalties has roughly 25,300 net royalty acres, resulting in the combined firm’s presence in the most prolific basin at 85,700 net royalty acres.
With the acquisition likely to be complete by the third quarter of this year, VNOM expects to produce 122,000-130,000 barrels of oil equivalent per day in the fourth quarter of 2025. For 2026, Viper Energy forecasts mid-single-digit percentage growth in average production from the fourth quarter of 2025, suggesting confidence in the long-term profitability of its Permian assets.
Does the Deal Signal Permian Basin’s Appeal Amid Oil Slump?
This aggressive move comes despite a slump in crude prices. According to data from the U.S. Energy Information Administration, the average Cushing, OK, WTI spot prices declined to $62.17 per barrel in May from $75.74 per barrel in January this year. The price downturn and broader energy market uncertainty, in part due to geopolitical tensions such as the U.S.-China trade conflict, have generally slowed mergers and acquisitions across U.S. shale regions.
Yet, VNOM’s acquisition underscores the enduring attractiveness of the Permian Basin. This is primarily because of low break-even costs. According to Statista, a leading platform for data collection and visualization, the break-even price in the Permian Basin, especially in the Delaware and Midland sub-basins, is well below $40 per barrel. Thus, even though WTI oil is currently trading below $65 per barrel, operations in the Permian are highly profitable.
Are Permian Players Now in the Spotlight?
Given the context, it is evident that exploration and production activities in the Permian are gaining momentum. As oil volumes rise, the need for midstream infrastructure, including pipelines and storage facilities, will also grow to accommodate the increased production.
This trend bodes well not only for oil producers in the region but also for midstream companies facilitating transportation and storage. As a result, investors should closely monitor key players with significant Permian exposure.
2 Must-Watch Stocks: OXY & EPD
Low-Cost Inventory in the Permian Secures OXY’s Profitability
In the Permian Basin, Occidental’s operations are spread across 2.9 million net acres, making it among the largest acreage holders in the United States. OXY, with a Zacks Rank of 3, has 6,300 high-quality development locations with break-even costs of below $50 per barrel, with the majority of the locations in the Permian. Occidental also has 3,600 key locations, again mostly in the most prolific basin, having a break-even of less than $40 per barrel. Thus, Occidental’s overall operations are profitable, considering the pricing environment of crude oil.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Permian Well Connections Can Brighten EPD’s 2H25
Enterprise Products has a strong presence in the Permian Basin, the most prolific basin in the United States, as its customers are primarily large upstream and integrated oil and gas companies.
On its recent earnings call, the partnership stated that last year, it connected more than 1,000 new oil and gas wells, most likely primarily from the Permian Basin, although this was not explicitly confirmed, to its pipelines and processing plants. The #3 Ranked partnership expects a similar number this year. However, most of these new connections are planned for the second half, which means that the largest increase in activity and earnings from these wells is likely to come later in 2025.