Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Pioneer Natural falls after fourth multi-billion shale deal of the year 

Published 04/05/2021, 01:11 PM
Updated 04/05/2021, 01:15 PM
© Reuters. FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County

© Reuters. FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County

(Reuters) -Shares of Pioneer Natural Resources (NYSE:PXD) declined more than 6% as the U.S. oil producer's $6.4 billion acquisition of rival DoublePoint Energy months after a large deal took investors by surprise, with the sector still recovering from last year's crash.

Pioneer's fourth multi-billion shale deal this year comes as investors in the shale patch have called on producers to focus on cash flow and shareholder returns, rather than spending to grow, as demand remains low due to the COVID-19 pandemic.

In January, Pioneer closed its $4.5 billion, all-stock purchase of Parsley Energy (NYSE:PE), giving it one of the largest positions in the Permian Basin, the top U.S. shale field.

RBC Capital Markets said it was surprised Pioneer made such a large acquisition after Parsley Energy and that the rationale seemed to be part opportunistic and part defensive.

The stock-and-cash deal for DoublePoint Energy, the largest privately-held U.S. oil producer since 2011, increases Pioneer's holdings in the Permian to more than 1 million net acres.

KeyBanc downgraded Pioneer to "sector weight" and said it was "one of the highest purchase prices we have seen in years, and it was surprising given the fact that it is largely undeveloped and a bit dilutive to PXD's average acreage quality."

DoublePoint Energy will add 97,000 acres to Pioneer's holdings in the Permian Basin and analysts at Cowen & Co praised the deal, saying it "undoubtedly fits like a glove within PXD's Midland Basin acreage and...increases expected per share variable dividends in 2022."

© Reuters. FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County

Morgan Stanley (NYSE:MS) said the acreage overlap of the two companies provides industrial logic for the transaction and viewed the deal as accretive to Pioneer's free cash-flow.

Pioneer's shares fell 6.1% to $154.52, slightly more than the 3% decline in oil prices.

Latest comments

Nationalize Fossil Resources before it is too late, (IF it isn't already).
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.