Permian Basin’s Largest Producer Grows Bigger in $6.4 Billion ‘Bolt On’ Deal
Pioneer Natural Resources is moving to complete its second major acquisition of another shale producer in less than 6 months.
Pioneer Natural Resources announced late Thursday an agreement to acquire smaller oil and gas producer DoublePoint Energy in a deal valued at $6.4 billion, including $900,000 in debt and liabilities.
The transaction gives Pioneer an additional 95,000 acres of leases in Midland Basin, the eastern half of the Permian Basin that lies entirely within Texas.
Pioneer will boast more than 1 million net acres in the Permian after the deal closes, which is expected to happen next quarter, and has emphasized that its positions are not on federal lands where new leasing has been paused indefinitely by the White House.
In exchange, DoublePoint shareholders will receive more than 27 million shares of Pioneer and $1 billion in cash. The stock portion of the deal will effectively give DoublePoint shareholders 11% ownership of Pioneer which is expected to have a pro-forma market value near $47 billion.
DoublePoint, a private equity-backed operator, is producing around 100,000 BOE/D; the two companies did not provide a breakdown of actual oil and gas volumes.
“Pioneer is now the largest producer in the Permian Basin, providing us significant benefits of scale,” Scott Sheffield, Pioneer’s CEO, noted during a webcast on the deal’s announcement. “We now significantly dominate the Midland Basin, producing over twice as much as the nearest peer,” he added.
In describing the deal as a “bolt on” transaction, Pioneer highlighted that much of DoublePoint’s acreage runs adjacent to its own and is “largely undeveloped.” This adds operational advantages while achieving the core necessity of increasing the development runway for the larger operator.
Pioneer will slow DoublePoint’s development speed, bringing its rig count down from 7 to 5, or lower, by year’s end. The reduction will aim to keep DoublePoint's produciton flat vs. the 30% growth rate it had been targeting. This is to bring the new asset in line with Pioneer's topline goal of maintaining a modest 5% overall production increase for 2021.
Pioneer plans to use available cash and will borrow to cover the $1 billion-dollar payment. The operator also expects to net $175 million in annual savings through a mix of reduced staffing, overhead, and operational costs.
Analysts have noted that in addition to being the US shale sector's highest-priced acquisition of the year so-far, it is also the first to come after US crude prices have held a steady position in the $60/bbl range.
In October, when US oil prices were around $40/bbl, Pioneer made an all-stock deal worth $4.5 billion to take over Parsley Energy.
Before the deal closed in January, Pioneer said its production was set to top 328,000 B/D. This placed it ahead of Occidental Petroleum to claim the status of largest oil producer in the Permian, which is the most-prolific basin in North America.