Pioneer Natural Resources, one of America’s biggest independent oil operations, is to acquire rival Texan producer DoublePoint Energy for $6.4 billion in a cash and stock deal. Pioneer announced on Friday the acquisition would give it an “unmatched” scale in Texas’s Permian Basin.
DoublePoint is a private-equity-backed production that increased its production through last year’s price crash, which briefly brought down US oil prices trading below zero. According to Pioneer, despite its expanding presence in the Permian Basin, it would stick with its own strategy to increase output.
“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 US shale industry and generating significant value for our shareholders,” said Scott Sheffield, Pioneer’s chief executive.
At the start of this year, Pioneer completed a $7.6 billion acquisition of Parsley Energy, another large Permian producer. The oil price crash of 2020 triggered several bankruptcies across the shale patch in the U.S. According to Enverus, around $50 billion worth of deals were struck in the second half of 2020.
In order to attract investors, an increasing number of shale operators are now looking to replace negative cash flow and debt-fueled drilling with slow production growth which will yield high returns in the future.
DoublePoint is backed by private-equity groups Apollo Global Management and Quantum Energy Partners. It was among the few non-listed Permian Basin producers that made a profit last year.
Pioneer’s acquisition offer comprises of 27 million in shares, $1 billion in cash the around $900 million in debt. According to Pioneer, the DoublePoint acquisition would allow for an increase in the variable dividend paid to shareholders next year.
