Pioneer to Pay in Cash and Stock
Pioneer said it will finalize the business deal by paying $1 billion in cash and 27.2 million shares of Pioneer stock. Furthermore, the oil and gas company will take approximately $0.9 billion of debt and liabilities, while it plans to finance a cash portion through a combination of existing cash holdings and new borrowing arrangements.
“DoublePoint has amassed an impressive, high quality footprint in the Midland Basin, comprised of tier one acreage adjacent to Pioneer’s leading position. We are pleased with their decision to become long-term partners with Pioneer in a transaction that will complement our unmatched position in the core of the Permian Basin,” Scott Sheffield, CEO of the Pioneer company stated in a press release.
DoublePoint is backed by equity commitments from a global alternative investment business Apollo Global Management, as well as Quantum Energy Partners, Magnetar Capital, and GSO Capital Partners. Pioneer said it will incorporate Double Point’s assets into its own business model, including significant production capacities and growth of DoublePoint.
“The acquired acreage is primarily undrilled and augments Pioneer’s premium asset base, increasing the Company’s acreage position to greater than 1 million net acres with no exposure to federal lands. The Company expects production from the acquired assets to reach approximately 100,000 barrels of oil equivalent per day by late in the second quarter,” Pioneer said in a statement.
Once the transaction is completed, which is expected to take place in Q2 this year, shareholders of Pioneer will own about 89% of the combined company. DoublePoint shareholders will own around 11% of the new company.
The Dallas-based company added that it expects the new company to have a production capacity of about 100,000 barrels of oil equivalent per day by the end of the second quarter. On the synergies front, two companies are expecting to save about $175 million in annual savings. The expected present business value of cost savings will total $1 billion over the next 10 years.
Bloomberg Intelligence analyst Vincent Piazza says that the DoublePoint business deal, as well as other transactions in the past, have cemented Pioneer as “a formidable rival in the basin, with enviable scale and asset concentration.” As a result, the oil and gas company is now favorably positioned to emerge as one of the large, independent survivors of Permian consolidation.”
This business deal represents one of the largest transactions in North America’s oil industry in 2021 and the largest one in the past few months. In October last year, Pioneer agreed to buy Parsley Energy for $4.5 billion in stock.
Pioneer stock closed 3.55% higher yesterday while shares trade nearly 45% in the green year-to-end (YTD) amid rising oil prices.
Pioneer has agreed to buy DoublePoint in a business deal worth $6.4 billion that is expected to close in Q2 this year.
About the Author
Mariliana has an MSC in consumer analytics and business strategy. She has a special interest in fast-moving industries and big data.