Back to top

Image: Bigstock

Pioneer Natural (PXD) Divests Texas Acres to Laredo for $230M

Read MoreHide Full Article

Pioneer Natural Resources Company (PXD - Free Report) recently agreed to divest some assets in Texas to Laredo Petroleum, Inc. (LPI - Free Report) . The deal is likely to fetch the upstream company $230 million.

The deal included around 20,000 net acres located in western Glasscock County and is expected to close in the next month. The divested acres currently produce around 4,400 barrels of oil equivalent per day, of which 59% is crude oil. Pioneer Natural will receive $160 million in cash and 959,691 Laredo common shares from the divestment.

While the deal is expected to boost Laredo’s footprint in the prolific Midland Basin, it is in line with Pioneer Natural’s plan of divesting some of its non-core assets. The company is planning to divest its assets in the Delaware Basin, per Reuters. It is also expecting to generate more than $2 billion from the divestments.

The recovery in commodity prices has made divestments of oil and gas assets more profitable for upstream companies. As such, Pioneer Natural expects to attract more cash from selling non-core properties. The company received the assets, which are now up for sale, from the Parsley Energy acquisition, per Reuters. The divestment program is likely to help Pioneer Natural streamline the upstream portfolio. As investors these days are putting pressure on companies to boost shareholder value rather than production, upstream companies like Pioneer Natural are focusing more on profitable resources.

Cash from offloading the assets can enable it to reduce debt burden and provide its balance sheet with some breathing room. As of Jun 30, 2021, the cash balance totaled only $93 million. Long-term debt summed $6,926 million at second quarter-end, up from $3,160 million at 2020-end.

Price Performance

The company’s shares have gained 61.4% in the past year compared with a 107.2% rise of the industry it belongs to.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank & Stocks to Consider

Currently, Pioneer Natural has a Zacks Rank #3 (Hold). Some better-ranked stocks from the energy space include Cheniere Energy, Inc. (LNG - Free Report) and Chevron Corporation (CVX - Free Report) , each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Cheniere Energy’s bottom line for 2021 is pegged at $2.98 per share, indicating a massive improvement from the year-ago loss of 34 cents.

The consensus estimate for Chevron’s earnings for 2021 is pegged at $6.73 per share, indicating a major improvement from the year-ago loss of 20 cents.