On Sunday, China’s Shandong Xinchao announced its decision to shell out $420 million to purchase oil-producing acreage from Grenadier Energy in the Texas Permian Basin.
Or rather, Surge Energy of Houston made the announcement via PR Newswire.
HOUSTON, Jan. 31, 2021 /PRNewswire/ — Surge Energy US Holdings Company (“Surge Energy” or the “Company”) announced in the US that it, through its subsidiary, has signed a purchase and sale agreement to acquire leasehold interest and producing wells from Grenadier Energy Partners II LLC (“GEP II”) in Howard County, TX (the “Transaction”). The aggregate purchase price of the Transaction is expected to be approximately $420 million USD.
Highlights of the acquired assets include:
- Average production of approximately 9,000 Boepd (approximately 75% oil)
- Approximately 18,010 net leasehold acres
- Operated inventory of approximately 120 high-quality, economic future drilling locations
The Transaction is expected to close in late first quarter.
Read the entire release and you’ll not see the words “Shandong Xinchao” in it. But Surge is that company’s creation and wholly owned subsidiary. That’s disclosed on Surge’s corporate website.
Surge Energy America was formed in early 2015 as a U.S. subsidiary of Chinese based Shandong Xinchao Energy Corporation Limited, a publicly traded company on the Shanghai Stock Exchange, with a strategy to make a significant acquisition in the U.S. oil shale play and pursue a long term sustainable U.S. oil & gas company. Upon entering into an agreement to purchase its first asset, Hoople Field, in early 2015, the Surge Energy organization began in May 2015 to enable taking over operatorship. Hoople Field is a 5,000 acre established water flood asset in Crosby County, TX.
Bloomberg published a brief piece about the deal but left Surge’s name out of it.
Since its creation in 2015, Surge Energy has continued to grow its in the Permian Basin. Before the COVID pandemic destroyed demand, ravaged the oil industry, and sent several producers into bankruptcy — and before this deal with Grenadier — Surge was already one of the top oil producers in Texas. After the Grenadier deal Surge Energy, aka Shandong Xinchao, will control about 111,000 acres of oil-producing land in Texas.
As of December 2020, Surge Energy was producing about 63,386 barrels per day according to data from the Texas Railroad Commission, ranking it 18th in production overall. The added production from the Grenadier purchase may push its ranking to as high as 15th.
China was the world’s largest oil importer pre-pandemic, producing about 5 million barrels per day while importing 8 million to match its consumption of about 13 million barrels per day. The United States at that time was the world’s largest oil producer, pumping between 11 and 12 million barrels per day. About 41% of U.S. oil is produced in Texas, according to the U.S. Energy Information Agency. Joe Biden promised not to ban fracking when he was running for president, but after inauguration he issued an executive order that effectively bans fracking on federal lands by halting leasing and permitting. His order will have little impact on Texas lands such as that purchased by Shandong Xinchao’s subsidiary, but will heavily impact states with large amounts of oil-producing federal lands such as New Mexico.