On Tuesday, US shale producer Pioneer Natural Resources Co. announced its plan to buy rival Parsley Energy Inc. in an all-stock deal deemed to establish the biggest Permian Basin-only focused shale producer.
The deal is valued at about USD4.5 billion which is scheduled to complete in the first quarter of 2021. Parsley’s CEO Matt Gallagher will join Pioneer’s board.
Pioneer CEO Scott Sheffield commented that the deal would prop up cost savings and cash flow for the company. “It is positioning Pioneer as one of a few investable independents,” he said.
Pioneer’s shareholders will own about 76% of the combined company and Parsley shareholders will receive 0.1252 shares of Pioneer for each share held.
The combined company will have around 930,000 acres in the Permian with an output of around 328,000 barrels of oil per day (bopd). However, both companies do not hold federal acreage, which is deemed at higher risk compared with state or private lands in case drilling rules change after the US presidential election.
Many shale firms have been struggling to cope with weak crude prices, most also have trouble to raise new capital to restructure heavy debts. Sheffield estimated that there would be only three or four survivors in the condition. He mentioned that his own company, then ConocoPhillips, EOG Resource, and Hess would survive if they could entice investors’ interest.
