The Pioneer - Double Point Energy - Permian Deal -- April 2, 2021

This page has turned into a real mess. Sorry. Not sorry.

 

Compare the COP - Concho deal here:

• $10 billion vs $6.4 billion
• 550,000 acres vs 97,000 acres

Updates

May 10, 2021: from social media today --

 

April 3, 2021: very nice update here. 

Original Post

 

I found it impossible to put this page in any orderly fashion so just a bunch of links, comments, re-postings, etc. 

I hope readers see the theme.

 

If this page fails to provide that ("the theme"), perhaps this link to twitter will. The only "given" in this deal, and noted by others, Sheffield is betting on $80 - $100 oil.

• $80-oil: he survives as CEO
• $90-oil: he looks brilliant; becomes the new face of the shale sector
• $100-oil: enshrined as a saint at the Holy Lady of Shale

 

Raise your hand if you think we'll see $100 oil by the end of the year. By the way, having said that, based on 2Q21 picks by BofA, others may be thinking the same thing: significantly higher oil prices.

 

As of late Friday night, the most recent article regarding the Pioneer - DoublePoint Energy deal: from The Dallas Morning News -- "Pioneer Natural Resources says it will be Permain Basin's biggest producer with $6.4 billion purchase of DoublePoint. Link here. Data points and observations:

• no financial analysis; nothing more than a reporter's narrative of the press release in the big scheme of things;
• will have more than one million net acres in the Permian (Midland Basin);
• article does say the company paid a "hefty premium" relative to recent mergers and acquisitions but doesn't say what that "hefty premium" was;

Much of this was posted earlier today. It is interesting that very little has been written about this deal (so far -- maybe everyone took off early for the Easter weekend). I am re-posting the following and then below this will add updates. 

Pioneer to acquire DoublePoint Energy assets, press release here:

• bolt-on acquisition
• Midland Basin
• $6.4 billion
  
• 97,000 high quality (tier 1) net acres
• back of the envelope: $6.4 billion / 97,000 net acres = $66,000 / acre
• 27.2 million shares of Pioneer common stock
• $1 billion in cash
• $0.9 billion in debt and liabilities
• forward:
• the deal "will lead to an increase in the expected per share variable dividend beginning in 2022" -- raise your hand if you think you will see an increased dividend in 2022.
  

At almost $70K/net acre, social media is having a field day with this one. Lots of talk that "we're" back to lack of fiscal discipline in the shale sector. 

Link here.

Link here.

 

*****************************
"PXD Gets It"

From twitter:

Pioneer's market cap is $36 billion. Pioneer's total value is contained within its Permian footprint. 

Does the Double Point Energy footprint look like a sixth of that $36-billion market cap? 

Possibly. I don't know. I find it interesting how the analyst who wrote the note in the graphic above simply "ignored" 2/3rds of $6.4 billion, or $4.3 billion. This is like saying Double Point Energy was paid $6.4 billion for the deal, but it only cost Pioneer $2.1 billion. Somehow the books don't balance. Whatever. Value it anyway you want. 

What others think:

Monday:

• watch share price of PDX; should be fascinating; and,
• article over at SeekingAlpha on this deal.