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

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%.

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.

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.

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