Mesa Inc. and Parker & Parsley Petroleum Co. have signed a definitive agreement to merge and create a new independent exploration and production company, Pioneer Natural Resources Co.
Mesa is headquartered in Dallas and Parker & Parsley in Midland, Tex.
Subject to regulatory and shareholder approvals, the resulting new company would be the third largest independent exploration and production company in the U.S., the parties said. It will be based in Irving, Tex.
"We will be exposed to more and better opportunities for exploitation, exploration, and strategic acquisitions," said Scott Sheffield, chairman and CEO of Parker & Parsley. Sheffield will be president and CEO of Pioneer.
Jon Brumley, chairman and CEO of Mesa, will be chairman of Pioneer.
It is expected the merger, with an effective date of Jan. 1, 1997, will be completed in July.
Based on the total outstanding stock of both companies on a fully diluted basis as of market close Apr. 4, and including the combined net outstanding debt of both companies totaling $1.3 billion, the deal is valued at $4.2 billion in the aggregate. Excluding debt, the market capitalization of Pioneer is $2.9 billion.
Deal, dealmakers
Pioneer's management, directors, and affiliates will own about 17% of the company's common stock after the merger is consummated, which officials said is one of the highest levels of insider ownership among the top independent E&P companies.
Richard Rainwater, currently a Mesa director and its largest individual shareholder, will be a Pioneer director and its largest individual shareholder. Rainwater and his affiliates own all of the outstanding Mesa Series B preferred stock.
Shareholders of Mesa common stock will receive one share of common stock in the new Pioneer company for every seven shares of Mesa stock held; Parker & Parsley common shareholders will receive one share of Pioneer common for each share of Parker & Parsley stock held.
Holders of Mesa Series A 8% cumulative convertible preferred stock and Series B 8% cumulative convertible preferred stock will have the option to receive either 1.25 shares of Pioneer common for every seven shares held or one share of Pioneer Series A 8% cumulative convertible preferred stock for every seven shares held. These shares are convertible into one share of Pioneer common stock.
If a majority of the outstanding shareholders of Mesa's Series A preferred stock vote in favor of the merger, then all Series A shareholders will receive Pioneer common shares based on the described ratios.
The combined companies
Pioneer, which will have about 1,000 employees, will retain Parker & Parsley's operations in Midland. It will also have significant operations in Amarillo, Corpus Christi, and Houston, Tex., as well as in Oklahoma City and Lafayette, La.
The new company's proved reserve base-52% natural gas and 48% crude oil and liquids-will total more than 3.7 tcf of gas reserves on an equivalent basis, consisting of 1.7 tcf of gas and 293 million bbl of crude oil and liquids.
Pioneer's 1997 capital spending, totaling $400 million and excluding recent and pending acquisitions, will be directed at increasing production and reserves. Of the total, it plans to invest $300 million on reserves development, and about 600 wells will be drilled, including horizontal/dual lateral wells.
The company expects to invest about $100 million to explore for new reserves, and it will continue to pursue strategic acquisitions.
