The all-stock transaction is valued at about $4.5 billion. Parsley shareholders will receive 0.1252 shares of Pioneer stock for each share of Parsley. Including debt, the total value of the acquisition is about $7.6 billion.
Pioneer expects the merger to produce annual synergies of $325 million and add to cash flow, earnings per share and corporate returns in the first year.
Late Monday, the Wall Street Journal reported that the two Permian Basin shale companies could complete the deal by the end of the month.
The merger is a family affair as Pioneer CEO Scott Sheffield is the father of Parsley’s co-founder and Chairman, Bryan Sheffield. Parsley’s current CEO, Matt Gallagher, has previously worked at Pioneer.
Ahead of the official announcement, analysts were bullish on the prospects for a merger.
“Parsley has long stood as one of our top consolidation targets, and rumor of a potential deal hitting financial headlines shouldn’t come as a big surprise,” wrote analysts at Tudor, Pickering & Holt in a morning note. “It wouldn’t be out of the realm of possibility with increased scale for the combined company to further work down well costs towards leading-edge levels.”
The combined company would have roughly 928,000 net acres, according to the analysts, in the Permian Basin.
Pioneer shares fell 4% to close at 83.53 on the stock market today and eased another 0.4% after hours. Parsley rallied 5% to finish at 10.62 but then gave up 2.6% in late trading.
Busy Year For Permian Basin Mergers
Demand for oil has weakened during the coronavirus pandemic and shale companies are finding ways to survive the downturn.
Chevron (CVX) announced it would buy Noble Energy in July for $5 billion. Noble Energy established a significant presence in the Permian Basin with its 2015 acquisition of Rosetta Resources, then added to it after taking over Clayton Williams Energy in 2017.
Follow Gillian Rich on Twitter @IBD_GRich for energy news and more.
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