- Pioneer Natural Resources Company (NYSE:PXD) recently announced that it has entered into a definitive purchase agreement to buy the leasehold interests and related assets of DoublePoint Energy for $6.4 billion. These are the details.
Pioneer Natural Resources Company (NYSE:PXD) recently announced that it has entered into a definitive purchase agreement to buy the leasehold interests and related assets of DoublePoint Energy in a deal valued at approximately $6.4 billion as of April 1, 2021, comprised of approximately 27.2 million shares of Pioneer common stock, $1 billion of cash and the assumption of approximately $0.9 billion of debt and liabilities.
These are how the transactions enhance the investment framework:
1.) Accretive to Key Financial Metrics – Pioneer is expecting the deal to be accretive on key financial metrics including cash flow and free cash flow per share, earnings per share, and corporate returns during 2021 and beyond.
2.) Increases Variable Dividend Outlook – The deal is consistent with Pioneer’s priority of returning capital to shareholders, the accretive nature of this transaction to free cash flow leads to an increase in the expected per-share variable dividend beginning in 2022 and beyond.
3.) Unmatched Permian Scale – This deal represents a contiguous position of about 97,000 high quality net acres directly offsetting and overlapping Pioneer’s existing footprint. And 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. Plus 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.
4.) Significant Synergies – The deal is expected to result in annual cost savings of approximately $175 million through operational efficiencies and reductions in general and administrative (G&A) and interest expenses. And the expected present value of these cost savings totals approximately $1 billion over a 10-year period.
5.) Top-Tier Balance Sheet Maintained – Pioneer’s pro forma leverage metrics are going to remain relatively unchanged, among the lowest in the industry, thus preserving the company’s financial and operational flexibility and allowing for a significant return of capital to shareholders.
Pioneer is going to issue approximately 27.2 million shares of common stock in the transaction with an additional $1 billion of cash. And after closing, existing Pioneer shareholders will own approximately 89% of the combined company and existing DoublePoint owners will own approximately 11% of the combined company. Plus Pioneer plans to finance the cash portion of the purchase price through a combination of cash on-hand and existing borrowing capacity under its revolving credit facility.
The deal has been unanimously approved Pioneer’s Board of Directors and is expected to close in the second quarter of 2021, subject to customary closing conditions and regulatory approvals. And the deal is structured as the acquisition by a Pioneer subsidiary of 100% of the limited liability company interests of DoublePoint’s wholly owned subsidiary, Double Eagle III Midco 1 LLC.
“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. Pioneer will incorporate these assets into our investment model, migrating the assets from significant production growth to a free cash flow model, moderating growth for the U.S. shale industry and generating significant value for our shareholders.”
— Pioneer’s CEO Scott D. Sheffield
“The combination of Pioneer and DoublePoint is compelling from both a financial and operational standpoint and a natural fit for DoublePoint. This acquisition continues the trend of consolidation in the prolific Permian Basin, combining two complementary footprints in a transaction with both top- and bottom-line synergies.” Dheeraj Verma, President of Quantum Energy Partners added, “we are firm believers in Pioneer’s strategy of free cash flow generation, which enables a competitive base and strong variable dividend.”
— Geoffrey Strong, Senior Partner and Co-Head of Infrastructure and Natural Resources at Apollo
“We are proud and appreciative of the work that our team has done to build a company and an asset base that is unparalleled in quality and truly cannot be replicated. We are honored to have the opportunity to combine our business with Pioneer, who we have long admired and regard as the premier operator in the Midland Basin. The fit and the synergies are clear, and we look forward to working with Pioneer to continue creating value.”
— Cody Campbell and John Sellers, Co-CEO’s of DoublePoint Energy