The Four Recent Permian Deals -- April 3, 2021

Note: this was done quickly; not fact-checked. Various sources come up with different numbers; numbers change over time as the deals come to closure. This is for my benefit to try to make sense of these deals. If this is important to you, go to the source. If there are significant errors, feel free to let me know.

Note: these deals are not "apple-to-apple" comparisons. 

Note: the Permian "basin" is composed of two basins, the Midland and the Delaware.

Note: I don't follow the Permian, so there will be more typographical and content errors than usual.

Note: there are so many disclaimers here, you might as well skip this page and move on.

 

The four deals:

• COP -- Concho
• Permian net acres: 550,000
  
• deal: $10 billion
  
• CVX -- Noble
• Permian net acres: 92,000
  
• deal: $5 billion; with hefty debt, $13 billion
  
• Pioneer -- Parsley (no federal acreage)
  
• Permian net acres: 267,000
  
• deal: $4.5 billion
• Parsley, just months earlier had expanded in the Delaware by buying Jagged Peak Energy
• $1.6 billion for Jagged Peak (one source); another source: $2.2 billion;
  
• Pioneer -- DoublePoint Energy (probably no federal acreage)
  
• Permian net acres: 97,000
• deal: $6.4 billion

Background

Permian: is tracked here. 
Delaware Basin: is tracked here.
Midland Basin: is tracked here.

 

COP - Concho -- 2020

From SeekingAlpha, link here from March 31, 2021:

• In a financial and operational update, ConocoPhillips says it still sees FY 2021 capital spending of $5.5B and guides for full-year adjusted operating costs of $6.2B.
• The company expects full-year production excluding Libya of 1.5M boe/day, with Q1 volumes of 1.47M-1.49M boe/day, including ~50K boe/day of unexpected weather impacts caused by Winter Storm Uri.
• Total average realized prices for the quarter are expected in the $43-$45/boe range. ConocoPhillips says it expects to report ~$300M in Q1 pre-tax restructuring charges related to the acquisition of Concho Resources.
• The company also expects to incur $300M in losses from commodity hedging positions. Conoco says the expected total impact to cash from operations from the transaction and restructuring expenses in combination with the hedging impacts is a reduction of ~$1B, including ~$800M related to settling all oil and gas positions acquired from Concho.
• ConocoPhillips says the new merged entity will be the largest independent oil and gas company, and Wood Mackenzie says the combination "bodes well for the Permian's longer-term outlook."
  

From the February, 2021, 1Q21 earnings call, slides:

Concho acquisition:

• 23 billion boe of <$40 COS pro forma;
• earnings/loss:
• $1.0 billion loss;
• $0.97 EPS loss;
• cash flow from operations (CFO): $5.2 billion
• free cash flow: $0.5 billion
• paid $1.8 billion in dividends
• repurchased $0.9B worth of common shares

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CVX -- Noble

CVX - Noble: 

Chevron to buy Noble Energy. From SeekingAlpha:

• in the first significant M&A action since the coronavirus outbreak, Chevron agrees to acquire Noble Energy in an all-stock deal valued at $5B, or $10.38/share, a 7.6% premium over Noble's Friday closing price of $9.65
• including Noble's hefty debt load, the deal would be valued at ~$13B
• buying Noble enhances Chevron's presence in the Permian Basin with 92K largely contiguous and adjacent acres, and in Colorado's DJ Basin, and brings assets in the eastern Mediterranean and West Africa.
• Chevron expects the acquisition to generate $300M in annual run-rate cost synergies before tax and be accretive to free cash flow, earnings and book returns one year after close.
• Noble is Chevron's first major strategic move after walking away from a bidding war for Anadarko Petroleum last year.

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Pioneer -- Parsley

Pioneer - Parsley:

From SeekingAlpha, October 20, 2020:

[Scott Sheffield] has agreed to purchase [his son's energy company] in an all-stock deal valued at about $4.5B. Adding debt to be assumed by Pioneer brings the value to $7.6B. The deal price works out to a 7.9% premium to Parsley's closing share price on October 19, 2020.

Parsley owners are to receive 0.1252 shares of Pioneer common stock for each share of Parsley they hold.

Annual synergies of $325M are seen, and the deal is expected to be accretive to cash flow per share, free cash flow per share, EPS, and corporate returns, beginning in year one.

The combined company will have about 930K net acres in the Permian basin, and a production base of 328K barrels of oil per day, and 558K barrels of oil equivalent per day.

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Pioneer -- DoublePoint Energy

 Pioneer - DoublePoint Energy:

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.