Permian inventory gaps: a creative way to contemplate consolidation

Lower 48 M&A activity has ramped up with a vengeance. Investors are pushing for profitability and cash flow, and producers are responding by combining portfolios to scale-up low cost inventory, capture more efficiencies, and stop margin leakage. Recent deals prove that buyers are willing to pay so it's logical to contemplate the next set of deals and model what further consolidation could mean for supply. A changing operator landscape impacts how Permian assets get developed. Could it bring barrels forward, or flatten the growth profile? The race to build bigger footprints with high-quality inventory is the key driver of deal flow. These are quantifiable metrics that can be modelled. Poor inventory means growth will be more expensive and strong inventory makes acreage desirable for onlookers. In this paper, we set out to advance the thinking around this complex issue. What makes an operator a likely acquisition target and which companies need more top-tier inventory to sustain growth?