Pioneer Natural Resources says it will be Permian Basin’s biggest producer with $6.4 billion purchase of DoublePoint

Irving-based Pioneer will increase its position to more than 1 million net acres with the 97,000 acres from Fort Worth-based DoublePoint, which it said is ‘primarily undrilled’ new land.

April 5, 2021 Stu Turley Finance, M & A, Top News

Reese Energy Consulting – Sponsor ENB Podcast

Pioneer Rig in Midland - Energynewsbeat.com
An oil rig and pump jack in Midland. Irving-based Pioneer Natural Resources has a deal to buy Fort Worth-based DoublePoint Energy.(Jacob Ford / AP)

Pioneer Natural Resources is buying its neighbor in the Midland Basin, making it the largest producer in the Permian Basin.

Irving-based Pioneer is using a combination of its own stock, cash and debt to purchase Fort Worth-based DoublePoint Energy in a deal valued at $6.4 billion.

Pioneer said it will use 27.2 million shares of its own common stock and $1 billion in cash to pay for the acquisition, plus it will assume about $900 million of DoublePoint’s debt.
Pioneer will increase its position to more than 1 million net acres with the 97,000 acres from DoublePoint, which it said is “primarily undrilled” new land. Production is expected to begin this summer, reaching about 100,000 barrels of oil equivalent a day.

That’s on top of a just completed major purchase in January of Permian Basin shale driller Parsley Energy in an all-stock deal plus the assumption of debt for a total transaction value of $7.6 billion.

“DoublePoint has amassed an impressive, high-quality footprint in the Midland Basin comprised of tier one acreage adjacent to Pioneer’s leading position,” said Scott Sheffield, Pioneer’s CEO.

The transaction makes Pioneer the largest oil producer in the Permian and dominant in the Midland Basin, where it will be producing more than twice the oil of its closest peer, Sheffield told investors on a recorded message Thursday.

Pioneer’s existing shareholders will own 89% of the combined company, and DoublePoint’s will own 11%.

finviz dynamic chart for PXD

The acquisition will be one of the largest in North America’s oil industry this year and the first big transaction since the rapid run-up in oil prices to more than $60 a barrel over the past five months. DoublePoint’s investors include Apollo Global Management Inc., Quantum Energy Partners, Magnetar Capital and Blackstone Group Inc.’s GSO Capital Partners.

It’s somewhat surprising to see the deal so close to the Parsley deal, but Pioneer likely believed DoublePoint was “simply too close a fit with their existing position to pass up,” said Andrew Dittmar, senior mergers and acquisitions analyst at Enverus, an Austin-based energy consulting firm.

For that, Pioneer paid a “hefty premium” relative to recent mergers and acquisitions, including Parsley, Dittmar said.

DoublePoint “is reminiscent of Permian deals in the bull land market from 2016-2018,” he said.

Sheffield is expanding in the Permian Basin in the aftermath of the worst oil-industry collapse in history. Crude prices have advanced 27% this year, more than erasing 2020′s slump, amid increasing optimism that economies will continue to reopen, sparking demand for gasoline, diesel and other fuels.

Pioneer Natural Resources' headquarters in Las Colinas.
Pioneer Natural Resources’ headquarters in Las Colinas.(Tom Fox – DallasNews)

The deal is the latest in a series of transactions as U.S. drillers consolidate in an effort to survive the upheavals caused by the pandemic. Pioneer’s announcement that it would acquire Parsley Energy last fall was followed by a takeover by ConocoPhillips of Concho Resources Inc.

“Pioneer is favorably positioned to emerge as one of the large, independent survivors of Permian consolidation,” Bloomberg Intelligence senior industry analyst Vincent G. Piazza said in a note. The company’s recent deals have created “a formidable rival in the basin, with enviable scale and asset concentration.”

DoublePoint was founded by co-CEOs Cody Campbell and John Sellers, who made their names flipping drilling leases in the Eagle Ford region of South Texas in the early days of the U.S. shale boom before moving on to the more lucrative Permian Basin. There, they assembled large holdings with backing from private equity firms including Apollo. In 2017, the pair sold rights to about 70,000 acres to Parsley for $2.8 billion.

Shortly thereafter, they raised more money, formed DoublePoint and set to work snapping up drilling rights in the Permian’s Midland sub-region. DoublePoint was running seven drilling rigs and was on course to produce 80,000 barrels of oil a day as of the first quarter this year.

Source: Dallas Morning News: Maria Halkias and Bloomberg contributed to this report.

Twitter: @MariaHalkias

About Stu Turley 4818 Articles
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor.   He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage, and is the Co-Host of the energy news video and Podcast Energy News Beat. Energy should be used to elevate humanity out of poverty. Let's use all forms of energy with the least impact on the environment while being sustainable without printing money. Stu is also a co-host on the 3 Podcasters Walk into A Bar podcast with David Blackmon, and Rey Trevino. Stuart is guided by over 30 years of business management experience, having successfully built and help sell multiple small and medium businesses while consulting for numerous Fortune 500 companies. He holds a B.A in Business Administration from Oklahoma State and an MBA from Oklahoma City University.

Related Articles