Pioneer Natural Resources to acquire DoublePoint Energy

Pioneer Natural Resources Co., Dallas, has agreed to acquire contiguous and largely undeveloped Midland basin leasehold interests and related assets of DoublePoint Energy for $6.4 billion.

This transaction represents a contiguous position of 97,000 core Midland basin net acres directly offsetting and overlapping Pioneer’s existing footprint, increasing the company’s acreage position to over 1 million net acres with no exposure to federal lands, Pioneer said in an Apr. 1 release. Production from the acquired assets is expected to reach 100,000 boe/d by late in the second quarter.

Annual cost savings from the acquisition are expected to be $175 million through operational efficiencies and reductions in general and administrative and interest expenses.

Scott D. Sheffield, Pioneer’s chief executive officer, said Pioneer will “incorporate these assets into our investment model, migrating the assets from significant production growth to a free cash flow model.”

According to Pioneer’s Apr. 1 investor presentation detailing the transaction, DoublePoint is currently running 7 drilling rigs, generating over 30% growth with net production. Pioneer said it will reduce the activity by about 30% by year-end 2021. Capital spending on the acquired acreage is expected at $470-570 million after close through year-end 2021.

After closing—expected in second-quarter 2021 subject to customary closing conditions and regulatory approvals—existing Pioneer shareholders will own about 89% of the combine and existing DoublePoint owners will own about 11%.

The transaction—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—is comprised of 27.2 million shares of Pioneer common stock, $1 billion of cash, and the assumption of $900 million of debt and liabilities. 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.