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Pioneer (PXD) Concludes Parsley Buyout, Creates Permian Giant

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Pioneer Natural Resources Company recently completed the acquisition of Parsley Energy, creating an upstream giant in the prolific Permian Basin. The $4.5-billion all-stock accord is expected to deliver significant synergies for the combined entity.

Both the companies’ shareholders approved the acquisition, which was announced last October. Shareholders of Parsley will receive 0.1252 Pioneer common stock for each share they hold. Mr. Gallagher and Mr. Alameddine, who earlier served on Parsley board, have joined Pioneer’s board of directors.

With the acquisition, Pioneer bolsters Permian presence. In the basin, the combined company is now expected to have 930,000 net acres with a daily output capacity of 558 thousand barrels oil equivalent, per data provided by Pioneer as of the June quarter of 2020. The proved reserves of Pioneer are also expected to receive a 65% boost. Importantly, the combined entity is now expected to save cost of $325 million, annually, thanks to the synergies.

Pioneer’s strikingly strong balance sheet has favored the acquisition of Parsley Energy. The acquirer earlier estimated that the deal can enable the combined firm to pay $75 million lower interest expense annually.

The oil industry is opting for acquisitions and mergers to reduce costs and expenses, which will help the companies to combat the pandemic-induced oil price volatility. Although there has been a jump in WTI Crude price to more than $50 a barrel, Pioneer’s ongoing production plans are expected to remain unchanged. Even though Saudi Arabia’s surprise oil market pledge to cut production in an effort to lift prices has worked its magic, the company is expected to take cautious measures.

Price Performance

Its shares have gained 49.9%, underperforming the industry’s 57.8% rally in the past three months.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include TC PipeLines, LP Suncor Energy Inc. (SU - Free Report) and Summit Midstream Partners, LP (SMLP - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TC PipeLines’ bottom-line estimates for 2021 have increased nearly 2% in the past 60 days.

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Summit Midstream’s bottom-line estimates for 2021 have increased 12.4% in the past 60 days.

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