Pioneer (PXD) Divests Pumping Assets, Inks Long-Term Deal

Pioneer Natural Resources Company (NYSE:PXD) has inked an agreement with oilfield service provider ProPetro Holding Corp. (PUMP).

Per the agreement, ProPetro will serve as a strategic long-term service provider to Pioneer supplying pressure pumping and associated services for about a decade. The company will sell pressure pumping assets (“PPS”) to ProPetro in a transaction valued at $400 million, which comprises $110-million cash and 16.6 million shares of ProPetro common stock. This will make Pioneer own about 17% in ProPetro following issuance. The transaction is anticipated to close during the fourth quarter of 2018.

The PPS assets comprise 8 fleets with 510,000 hydraulic horsepower (HHP) and associated facilities. On completion of the transaction, ProPetro will have 28 fleets with 1,415,000 HHP operating in the Permian Basin. This agreement is anticipated to boost ProPetro’s presence in the Permian Basin and augment operations. It will also enable Pioneer to improve capital efficiency and long-term cost competitiveness in core operations.

The combination of Pioneer’s Pumping Services with ProPetro will create the largest and most competent pressure pumping provider in the Permian Basin.

In the Permian Basin, the company expects to initiate production from 250-275 wells in 2018. Of the total, 200-225 wells will be from the northern area and 50 wells from the southern Wolfcamp joint venture area. Pioneer Natural expects Permian basin production between 293 MBOE/d and 303 MBOE/d in the fourth quarter of 2018. Moreover, the company expects 2018 production from the prolific Permian Basin to surge 19-24% from the year-ago level. The company’s focus on the Permian Basin is noteworthy as it provides ample growth opportunities.

Zacks Rank & Key Picks

Currently, Pioneer Natural Resources has a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Hess Corporation (NYSE:HES) , Enterprise Products Partners L.P. (NYSE:EPD) and Energen Corporation (NYSE:EGN) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

New York-based Hess is a global integrated energy company. The company delivered average positive earnings surprise of 230.5% in the last four quarters.

Headquartered in Houston, TX, Enterprise Products Partners is among the leading midstream energy players in North America. It pulled off average positive earnings surprise of 9.3% in the last four quarters.

Headquartered in Birmingham, AL, Energen is a leading oil and natural gas exploration and production company. It pulled off average positive earnings surprise of 18.6% in the last four quarters.

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