$450M deal sees Atlas Energy buy Hi-Crush frack sand company, boost Permian Basin capacity

Two sand providers for the oil and gas industry announced a $400 million merger last week, increasing proppant capacity in the Permian Basin as it continues to out-produce any other shale deposit in the U.S.

Atlas Energy Solutions said March 5 it completed its acquisition of Hi-Crush Inc. in a deal valued at $450 million in total that was announced Feb. 27. The sale included $150 million in cash, $175 million in stock shares and $125 million in deferred cash payments.

The combined company had a capacity of 28 million tons of proppant, which is combined with water and chemicals and pumped underground during fracking operations to break up underground rock formations to allow oil and gas extraction. Fracking was credited with the recent boom in fossil fuel production throughout southeast New Mexico and West Texas.

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The company also said the deal would combine Atlas’ operations in the western Delaware subbasin with Hi-Crush’s Midland Basin facilities, meaning the company’s footprint would extend throughout the larger Permian Basin.

“We believe this combination will accelerate efficiency gains for our combined customer base and will contribute to drive the ongoing transformation of the Permian Basin from a traditional oilfield to a more sustainable state-of-the-art energy manufacturing center on the ground,” said Chief Executive Officer Bud Brigham.

Chief Financial Officer John Turner said the consolidation would drive up returns to the company’s investors, part of a recent trend that saw oil and gas companies seeking to increase financial security after the historic bust amid the COVID-19 pandemic.

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“We believe our shared culture of innovation and our enhanced scale will drive further efficiencies, and in time will meaningfully expand our already industry leading margins and profitability,” Turner said. “Importantly, our advantaged scale and product offerings will also allow us to better support our customers’ objective to improve well economics.”

While Atlas sought to provide more materials for new wells to drill, another was increasing its scale in plugging and remediating old wells abandoned throughout the Permian.

JMR Services announced its merger with A-Plus LLC on March 5, increasing the plug and abandonment (P&A) service provider’s scale in the Permian, along with the San Juan Basin in northern New Mexico and the Denver-Julesberg Basin in Colorado.

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Oil and gas wells are abandoned by operators when they become financially unstable or go bankrupt, leaving the state to either use bonds paid by the companies to pay for such clean up, or fund the work using government funds.

New Mexico’s Oil Conservation Division estimated in 2022 there were about 1,700 such wells and began seeking federal grant funding to increase the state’s capacity to plug the wells and remediate the land. JMR Services said it works closely with regulators like the OCD on the work, and the merger could make it the largest P&A provider “in the nation.”

“This merger signifies a pivotal moment in the P&A sector, as the combination of JMR and A-Plus promises oil and gas operators enhanced service capabilities, operational efficiencies, and a strengthened balance sheet with minimal leverage,” said JMR Chief Operating Officer Lee Roark.

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The services provided by Atlas and JMR could become more in-demand in the coming months as the Permian’s oil and gas production was continued to grow this spring.

The Energy Information Administration (EIA) estimated oil production in the basin would climb by 14,000 barrels per day (bpd) in March for a total of about 6.1 million bpd – the most among U.S. shale regions. Natural gas was expected to increase by 134 million cubic feet per day (cf/d) this month for a total of 24.8 billion cf/d by the end of the month, according to the EIA’s latest data.

Crude oil prices were holding steady in the upper $70s, with the Chicago Mercantile Exchange reporting about $78 a barrel Monday morning. This marked a slight dip from the year’s highest oil price reported at $79 a barrel on March 1, according to Nasdaq.

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on the social media platform X.

This article originally appeared on Carlsbad Current-Argus: Atlas Energy's $450M frack sand merger boosts Permian Basin capacity