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Pioneer's (PXD) $4.5B Buyout Deal With Parsley is Official Now

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Pioneer Natural Resources Company (PXD - Free Report) has confirmed its $4.5 billion all-stock accord to acquire smaller rival Parsley Energy, Inc. . The deal is the latest among the spree of U.S. oil mergers and acquisitions, measures taken by shale players to combat the coronavirus-induced low crude price scenario.

The transaction, which has valued Parsley, with exclusive focus on the most prolific portions of the Permian Basin, at a 7.9% premium to its closing price as on Oct 19, is likely to close in the first quarter of 2021. Following the closure of the agreement, Pioneer Natural shareholders will have a 76% ownership stake in the combined entity, while Parsley stockholders will own the rest.

With the acquisition, Pioneer Natural will bolster its presence in the Permian, the most prolific basin in the United States. In the Permian, the combined company will have 930,000 net acres with a daily production capacity of 558 thousand barrels oil equivalent, as said by Pioneer Natural considering data as of the June quarter of 2020. The proved reserves of Pioneer Natural will also get boosted by roughly 65%, following the deal closure.

Importantly, the combined firm will be able to save cost of $325 million, annually, as estimated by Pioneer Natural. Thus, it has become increasingly evident that the oil industry is turning to acquisitions and mergers with an aim of cutting costs that will help combat the pandemic-induced stretch of oil price slump.

One of the factors that is making many analysts favor the deal is Pioneer Natural’s strikingly strong balance sheet, with significant low debt exposure as compared to the composite stocks belonging to the industry. Pioneer Natural estimates that the deal will aid the combined entity to pay $75 million lower interest expense annually.

Pioneer Natural, a leading oil and gas explorer and producer, is not the only energy firm that has agreed on an all-stock deal in the pandemic. ConocoPhillips (COP - Free Report) has confirmed its decision on Oct 19, to buy Concho Resources Inc. in an all-stock transaction, valued at $9.7 billion. Also, on Sep 28, Devon Energy Corporation decided for a $2.6 billion all-stock merger agreement with WPX Energy, Inc. Also, in Jul 20, integrated energy major Chevron Corporation (CVX - Free Report) agreed to acquire Noble Energy, Inc. in a roughly $5 billion all-stock deal, which was recently closed.

Currently, both Pioneer Natural and Parsley carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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